Vodacom license dispute could affect Congo clients

Vodacom Group Ltd.’s unit in the Democratic Republic of Congo will lose the right to provide 2G services this week unless it renews a disputed license, according to a government order.

The directive threatens to disconnect some of Vodacom Congo’s 11.8 million customers who’ve yet to switch to 3G and 4G, or live in remote areas not yet covered by the faster data services. Johannesburg-based Vodacom owns 51% of Congo’s biggest mobile operator, which generated about 6% of total revenue of 86.4 billion rand ($5.97 billion) last year.

Congo’s government wants Vodacom to reapply for a 20-year 2G license originally given to the company in 1998 because an “irregular extension” was granted in 2015, Telecommunications Minister Emery Okundji said in an order dated April 29 seen by Bloomberg. Vodacom lost the right to offer 2G services in January 2018, Okundji said, giving the firm a one-month “grace period” to renew the permit.

Vodacom is engaging with the authorities “in an attempt to resolve this unfortunate situation,” spokesman Byron Kennedy said in a statement sent by text message.

The company’s shares traded 0.7% lower at 116.23 rand by 4:50 p.m. in Johannesburg.

Vodacom Congo “vigorously refutes all allegations of fraud” in obtaining its license extension from former Telecommunications Minister Thomas Luhaka in 2015, according to a May 16 statement posted on the company’s Facebook page. The process of extending the license conformed with all laws and regulations in place at the time, including a single payment equivalent to 25% of the value of the license — or $16.3 million — to Congo’s Treasury, it said.

Government decisions outlawing license extensions and outlining renewal procedures “on which the fraud allegations are based” were adopted in 2016 and 2017, according to the statement.

“Legal orthodoxy requires that these new rules and procedures cannot apply retroactively,” the company said.

Luhaka didn’t answer calls and text messages seeking comment.

Other Frequencies

Okundji said the $16.3 million payment made by Vodacom related to additional frequencies obtained from the Congolese authorities in December 2015, rather than an authorization to continue operating 2G services. Unless the company takes steps to “regularize the renewal of the 2G license” within one month, the frequency spectrum will be returned to the state and then auctioned to a new buyer, he said in the directive.

Vodacom Congo will continue to operate 3G and 4G telephony services if it loses its 2G rights, Okundji’s chief of staff, John Aluku, said by text message on Monday. Vodacom Congo became the first company in Congo to launch commercial 4G services in May 2018.

The cost of renewing a 2G license is $65 million, according to the ministry.

Okundji has been contesting Vodacom Congo’s 2G license extension since 2017, when he became telecommunications minister, according to the ministerial order. In March, he established a commission made up of members of the telecommunications and finance ministries to “reconcile the parties’ points of view,” the ministerial directive said.

Vital Kamerhe, chief of staff to President Felix Tshisekedi, instructed the tax authorities on April 8 to “find a suitable solution” after Vodacom took the matter to the presidency, it said.

The decision to formally withdraw Vodacom Congo’s decade-long extension on April 29 was motivated by unsuccessful negotiations under the commission and the company’s failure to act on Okundji’s instructions to renew the license, according to the minister’s order.

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Vodacom license dispute could affect Congo clients