Business Report
*State takes control of Swazi MTN unit* *Sandile Lukhele, Business Report, Johannesburg, 30 March 2012*The Swaziland government has granted itself controlling shares in MTN's Swaziland subsidiary as the first step in a bid to lower cellphone service costs in the country.
The cabinet, at an emergency meeting this week, decreed that 51 percent of MTN Swaziland's shares, now controlled by Swaziland Post and Telecoms Corporation (SPTC), the troubled state telephone monopoly, will be transferred to a government entity described as a special purpose vehicle. MTN is a minority shareholder.
The share transfer is the latest development in a lengthy legal battle between MTN and SPTC. Although SPTC was the principal shareholder of the cellphone firm that has enjoyed a monopoly on cellular telephony in Swaziland since it was awarded a tender to set up a system in 1997, SPTC has rolled out two versions of cellphone service in recent years.
SPTC's services proved popular among Swazis because they were significantly cheaper than MTN's. MTN Swaziland charges R2.05 a minute during business hours compared with R1.37 charged by SPTC.
MTN Swaziland sued, arguing that it had a joint venture agreement that forbade SPTC to provide cellphone service but which allowed SPTC to continue monopolising fixed-line service. MTN Swaziland prevailed at the country's high court and when the case went before the Court of Appeals.
SPTC appealed to the International Court of Arbitration, which ruled in favour of MTN Swaziland last week. The court agreed with the MTN unit that a 1997 joint venture deal between MTN and SPTC forbade the latter from offering competitive cellular operations.
"The respondent (SPTC) is ordered to terminate forthwith the mobile component of any telephony network and service operated by it (be it mobile data services or functions in competition with the first claimant, voice or any text messaging services), to cease advertising... and to desist from canvassing subscribers and other potential users in respect thereof for so long as the respondent is a shareholder of the joint venture or the joint venture agreement... between the parties," the court ruled.
In a statement yesterday, MTN Swaziland said it and its shareholders "are not opposed to SPTC venturing into mobile services and competing with MTN, but SPTC cannot do so while still a shareholder in MTN Swaziland".
Minister of Information and Communications Technology (ICT) Winnie Magagula told Parliament this week that SPTC was to be blamed for MTN's high tariffs because it sought to maximise its profits as principal shareholder by approving MTN's fee increases. SPTC also acts as the country's regulator of telecoms services.
The SPTC board -- once described as "a mafia" by Prime Minister Sibusiso Dlamini -- and SPTC managing director Amon Dlamini were sacked by Magagula this week. This triggered a march by 1 000 SPTC workers to cabinet offices in Mbabane on Wednesday as staff looked for clarity on the group's fate.
The Swaziland business community has decried the lack of competition in Swaziland's cellular sector as a drag on business profitability and an encumbrance to investment in the country.
Freeing SPTC of its stake in MTN Swaziland should allow it to offer cellphone service. However, a new law is required to remove telecoms regulatory power from the corporation.
"No company can regulate itself and its competitors. It's an unnatural... advantage for any company," said an executive at a local internet service provider.
SPTC also regulates Swaziland's nascent internet industry while offering its own internet service. Private internet companies have pressed for the removal of SPTC's regulatory powers over the Web to allow SPTC to be a transparent and fair competitor.
MTN shares slid 1.5 percent to R137.40 on the JSE yesterday.*From: http://www.iol.co.za/business/business-news/state-takes-control-of-swazi-mtn-unit-1.1266976*
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