Econet to seek arbitration

By Damaria Senne, ITWeb senior journalist

Johannesburg, 11 Nov 2005

The Econet Wireless Group has been granted leave to launch arbitration applications against two other shareholders in Vee Mobile Networks (VMobile) of Nigeria: Delta State of Nigeria and First Bank of Nigeria.

According to an Econet media statement, this was done as a result of both shareholders` failure to purchase and sell shares in the company as per procedures outlined by the shareholders` agreement.

Econet says Delta State acquired an additional 15% of shares from Bromley and OO Networks without advising the other shareholders as required by the shareholders` agreement.

It says the acquisition of additional shares by Delta State only came to light during an investigation into VMobile`s affairs by the Nigerian Economic Financial Crimes Commission (EFCC).

"The EFCC found that contrary to the view of all other shareholders in the company, Delta has 25% in the company not 10% as recorded in the company register," Econet says in its statement.

Econet challenges bank

The Econet Group is also challenging the First Bank of Nigeria on its decision to withdraw the sale of its shares. According to Econet, First Bank offered its shares for sale to other shareholders in September.

Econet says following its payment for the shares, First Bank withdrew the sale. Econet argues that the sale should not have been withdrawn once the offer was accepted and is seeking arbitration on the issue.

Ongoing dispute

Econet is already involved in a separate arbitration process to establish what it claims is its pre-emptive right to increase its stake in VMobile from 5% to 51%. The arbitration dispute arose when Vodacom offered to acquire 51% of VMobile.

Econet, which currently holds a 5% stake in the company, wanted to exercise pre-emptive rights and buy the shares offered to Vodacom. However, some of the local shareholders in the company refused to allow Econet to exercise pre-emption, arguing that such a provision was not in the shareholders` agreement. Econet then invoked the provision for dispute resolution, which called for arbitration under the rules of the United Nations Centre for International Arbitration.

During court proceedings, the shareholders argued that the Federal High Court of Nigeria did not have jurisdiction on commercial agreements and that the matter should be referred to the state high court. However, at the end of October the federal high court ruled that it has the jurisdiction to appoint arbitrators in the dispute. The case has been set for 23 November, when a decision will be made on the appointment of arbitrators.

Econet is planning to seek a listing on the London Stock Exchange through an initial public offering that the company estimates will raise between US$400 million and US$500 million.