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Telkom’s disastrous failures in Nigeria, Mauritius, now under SIU investigation

Business Insider SA
Telkom under investigation
  • The Special Investigating Unit (SIU) will look into years of failed Telkom deals, and its payment for strategy advice.
  • President Cyril Ramaphosa referred allegations to the SIU by proclamation on Tuesday.
  • The investigation will go back to at least 2006.
  • Specifically included is Telkom's monumental Multi-Links failure in Nigeria, and a loss-making disposal in Mauritius.
  • For more stories go to www.BusinessInsider.co.za.

The Special Investigating Unit (SIU) has been told to investigate many years of Telkom's dealings on the rest of the African continent, as well as how it bought advice.

President Cyril Ramaphosa on Tuesday published a notice referring allegations to the SIU, making public an order he signed on 14 January.

In terms of the referral, the SIU must look back at least as far as 2006, though it can follow particular matters back further than that if necessary.

The state may have suffered losses that can be recovered, and civil proceedings may be called for, Ramaphosa said in a standard formulation used when the President refers cases to the SIU.

The government remains the largest shareholder in Telkom, with more than 40% of its equity, and the Public Investment Corporation (PIC), which manages state pension funds, owns another 14%.

The SIU investigation will range from organised corruption to misconduct by individuals that may simply have been improper.

Specifically to be investigated are "advisory services in respect of the broadband and mobile strategy of Telkom" – and whether it followed proper procedures when it bought such advice and paid fairly – and two disposals, of Multi-Links Telecommunications, and of iWayAfrica and Africa Online Mauritius.

Telkom bought control of the Nigerian Multi-Links in 2007, and bought out the company completely in 2009 at a valuation of over $500 million, the equivalent of some R7.6 billion at current exchange rates. Two years later it sold Multi-Links for $10 million – after a legal dispute blocked it from a sale that would have been worth $52 million.

By that time, analysts were simply relieved that Telkom had managed to walk away and would stop paying for increasing operational losses at the company, though related disputes continued to haunt it for years after the sale.

Instead of the GMS cellphone system used just about everywhere else – and which was very firmly entrenched before 2009 – Multi-Links used the competing American CDMA technology. Telkom had also badly underestimated how competitive the Nigerian market was, the SA government later said, and had failed to figure out distribution.

MTN has earned vast and still-growing profits from its operations in Nigeria.

iWayAfrica, created after Telkom bought MWeb Africa in 2007 and combined it with its related business Africa Online, had been intended as the sharp end of a pan-African wedge for Telkom. By the time it was sold in late 2013 it was an "immaterial part" of Telkom, the company said, having racked up losses. 

Telkom had paid R624 million for MWeb Africa, and R150 million for Africa Online.

(Compiled by Phillip de Wet)

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