Finally, someone to buy Telecel. Brainworks moves to end Indigenisation Impasse

L.S.M Kabweza Avatar

Telecel Zimbabwe Headquarters HarareIn a move that’s likely to breath new life into Telecel Zimbabwe, local private equity equity investment and advisory firm, Brainworks Capital Management, has offered to buy the 40% minority stake held by the Empowerment Corporation in the telecoms firm. A report in today’s Herald Newspaper says the investment firm has offered some $20 million for the stake.

The move seems to be the only option for a company whose current shareholders have not found a solution yet to the indigenisation problem so they can move to pump in money into the company and compete effectively on the market. The impasse has also affected the company’s ability to invest in basic things like an operating license on time. And just last week, POTRAZ wrote Telecel a letter advising them either they comply with indigenisation laws or give up the license. Currently, 60% is held by Vimpelcom, and the 40% by the empowerment corporation. The indigenisation law requires that majority ownership in the company be held by local indigenous Zimbabweans.

According to Patrick Zhuwawo, the Empowerment Corporation is currently considering the Brainworks offer.

brainworks-capital-logoThe next move by Brainworks will have to be buying the Vimpelcom stake in the business. Or at at least helping find a buyer for it, which is likely to go be an easier task than it has been with the Empowerment Corporation owning 40% of the company. Vimpelcom has been looking to sell Telecel Zimbabwe for a while now but haven’t succeeded finding a buyer likely because suitors didn’t want to have to work with the Empowerment Corporation as a partner in business.The Empowerment Corporation and hasn’t exactly demonstrated they are able to put the company’s interests first, ahead of and self interest over the years. Further, shareholders in the Empowerment Corporation are fighting each other for stake in the company.

In October last year, Vimpelcom sold all its Telecel assets in Africa except for the Zimbabwean Operation. The other assets were sold to Econet. Even if Brainworks decides to buy the Vimpelcom stake, chances are they will only want, because they only need, to buy enough to satisfy the indigenisation law. It will be interesting to see which companies outside Zimbabwe will suddenly be interested in Telecel Zimbabwe once the Empowerment Corporation and indigenisation is out of the picture. We don’t think it’ll Econet as the competition regulators would likely not allow it. MTN, Airtel, Tigo?

On The Telecel Zimbabwe side, internally, once the Brainworks transaction goes through, a staff restructuring will also likely be high priority.


  1. fourwallsinaroom

    You are telling me that for 40% of telecel I only need $20million? Thats a joke right? clearly that means its worth $50million? how can a mobile network be that cheap to own?

    1. L.S.M Kabweza

      $50 mil for a company in trouble, probably owes money in license fees, has Emp Group as shareholders etc…

      Also may be based on value of the rest of Telecel which was sold in October last year. Econet bought 2 country operations for $65 million. That was 2 million subscribers in Burundi and CAR (yes, a war zone you could say, but aren’t we in an economic war zone of our own?)

      ARPU in Leo Burundi and Telecel CAr was almost same as Telecel Zim. Total addressable market is smaller in Burundi and CAR obviously (15 million people combined) but just saying the valuation is not ridiculously when compared to recent group transactions.

      1. Optimus Prime

        You feel this valuation has been determined by the majority shareholder?

        1. L.S.M Kabweza

          No. But Brainworks may have factored in the evaluation of those other Telecel assets just sold

          1. Optimus Prime

            I fail to see how EC could be proposing a sell-off to a new investor when disputes remain over the EC stockholding. I think this will only be another drawn-out war that Telecel doesn’t really need. Besides the valuation itself, there’s no consensus on who owns what of EC. So…

      2. fourwallsinaroom

        Very insightful. I will follow this with keen interest. At $20mill. I am sure EWZ would snatch up telecel if and only if vimple was not part of the arrangement. Cant sell your secrets to the competition.

  2. Optimus Prime

    Really odd valuation. I would have imagined Telecel would be valued at more than $50million, even when debt is accounted for. Orascom put in $75-million into the business less than two years ago. Will wait to hear more from Brainworks. They’re very clever operators, that lot.

  3. mwana wevhu

    What if Brainworks is buying into Telecel only to hold to the shares and offload them to a foreign investor when they buy enough shares to control Telecel?

    1. ic0n1c

      That ain’t possible coz of the indigenousation laws.

  4. TSA – The Serial Analyst

    The $20million does not necessarily represent the true value of Telecel. It could be a discounted figure, especially given the fact that cash is pure gold these days in Zimbabwe. The Empowerment Corporation would rather receive the $20mill cash rather than wait for dividends which may not even come. Its the economic environment which BrainWorks are simply taking advantage of.

    1. ic0n1c

      Brainworks are just gonna hold on to the shares and sell them to a suitor when the country’s economic laws open up. They might likely be holding them for MTN. MTN has had a long standing interest in Zimbabwe’s telecoms sector but their shareholders are not too keen to put their money right now due to the indigenization fiasco in country which does not favor FDI. Brainworks will hold on to the stake up until 2018… but then again will Telecel still have a license???

      1. fourwallsinaroom

        MTN is working with Net*One. They actually have back to back arrangements that are now extensive. I would therefore assume MTN ultimately would want a stake in Net*One. If you recall TelOne has a GSM license that it is not using and “speculation” at the time was that the idea was to do infrastructure sharing with NetOne which ultimately would be MTN zim allowing the state owned Telone to kick start ops as a mobile operator and benefit from external investments. Sadly I cant cite my source

        1. tinm@n

          It wouldnt be legally possible for MTN to buy into Net One as it is parastatal. Same with TelOne.

          Unless laws were changed

          1. L.S.M Kabweza

            What is the law that prohibits? Curious

          2. tinm@n

            @Kabweza, I’ll retract that bit on legality of it. NetOne is now registered under the Companies Act, therefore operates privately.
            They are still 100% owned by Government,though… and cabinet still dictates NetOne’s direction, which made me still think its a public enterprise.

            There were talks sometime back about MTN coming in as a partner but even the GNU cabinet (almost unanimously) decided not to, preferring to retain control of the entity.

            It was concluded that issues at NetOne stemmed more from managerial issues than anything else. As growth is quite possible

  5. Observer

    For the development of the company, this is a positive move. I hope these guys can clean up the management so that Telecel can become more efficient in its operations.

  6. Vanhu VaMwari

    Surely something is not adding up here. The 20 year licence cost them 137m and they sell 40% for 20m?????????????????????????????????????????????????????????????????????????????????????????????????????

  7. mishelyn

    this deal doesn’t solve the indegenisation issue ,but brings to finality the fracas in the board room caused by those ibwo,warvets,makamba still leaves vipelcom with 60%,the best this company needs is an international investor ,who has a wider reach interms of capital,depth and innovation

  8. Adala

    Brainworks is offering to acquire the entire 40% local shareholding held by EC implying ALL of it. Of course, this is no news since the compliance issue remains unresolved. However, a new shareholder such as Brainworks may unlock avenues of opportunity for new investors since no one was interested in dealing with the lunatics and cash strapped politicians cum businessmen at EC. Wait a minute….. I smell a rat with this deal. Telecel is definitely being grossly undervalued with this so-called mega transaction being done at the local level. The company is understood to be worth about $150M plus. Brainworks, for all practical purposes, does not have the capacity and capability to fund and unlock value for Telecel in this highly competitive and capital intensive telecoms environment. Simply put, this transaction is basically to facilitate money to be transfered elsewhere. We are not naive to believe that this is part of the empowerment process. Nothing has changed at Telecel. The foreign shareholders still own 60% equity as of today and so its still 60/40 with no solution in sight for the capitalization of the company any time soon.