Business / Companies
Orascom's Telecel in Zimbabwe snooping storm
27 Jun 2013 at 07:58hrs | Views
EGYPT headquartered mobile telecommunications giant, Orascom Telecom has been battered by allegations of interference in the procurement policy of its Zimbabwean unit, Telecel Zimbabwe, with fears this has posed a potential security threat on the country.
Confidential documents seen by Fingaz alleged that Orascom directed former chief executive officer (CEO), Francis Mawindi, to deal with Egyptian and Middle Eastern firms when purchasing network equipment.
Telecel's procurement policy, which, as alleged by a report presented to government last week, is controlled from Cairo, was also reported to be violating empowerment laws directing "all government departments, statutory bodies and local authorities and all companies" to "procure at least 50 percent of their goods and services…from businesses in which a controlling interest is held by indigenous Zimbabweans".
But it is the issue of possible security threats that could worry government, which has already put pressure on Orascom to localise at least 51 percent of shareholding in Telecel Zimbabwe in line with the country's economic empowerment law and terms given when it was awarded an operating licence over a decade ago.
"The group CEO from Orascom, Ahmed Abou Doma at some stage expressed the need for the local operation to look into the possibility of importing used network equipment from Pakistan and Bangladesh," alleged the report.
"This is tantamount to dumping and in any case the origin of this equipment also has security concerns," alleged the document.
"This was more of a directive (but) the major cost factor of the mobile communications business is interconnect and international charges.
"This obviously brings the issue of transfer pricing into play…"
But the report highlighted that there were "also security risks where there is the possibility of wiretapping as we go into the election season" as a result of the procurement policy.
The risk of wiretapping is linked to the outgoing international traffic where WIS Telecom, an Orascom subsidiary, is the only wholesale carrier handling Telecel's outgoing international traffic, Telecel Zimbabwe insiders confided.
"With this arrangement, the carrier has the capacity and capability to eavesdrop on communications going out of Zimbabwe and use this as intelligence gathering for the country's foes. This can also pose a potential threat politically as we go into the election season," said a Telecel Zimbabwe technician who declined to be named.
He explained: "On the other hand, the old equipment coming from volatile regions such as Pakistan or Bangladesh will obviously present a problem for Telecel in terms of higher maintenance and replacement co-sts and can be used to jam communications for subversive and other clandestine activities. Other mobile operators are heavily investing in the modernisation of their telecommunication networks and systems in response to the dynamic and ever changing dictates of the market where competitive advantage is now clearly defined by high quality communications networks, data and value added services."
Orascom has poured close to US$70 million in network expansion since mid last year.
Telecel's subscriber base moved to 2,58 million by end of December last year, from about two million at the end of June 2012. Orascom executives reportedly met Transport, Communications and Infrastructure Development Minister, Nicholas Goche two weeks ago to spell out their empowerment plan and discuss licence renewal issues following government threats to withdraw Telecel's licence unless it complied with indigenisation laws.
The Financial Gazette's Companies & Markets was told government officials were studying confidential documents that raised several concerns against Orascom's Zimbabwean strategy.
These include its procurement policy, expatriate recruitment in jobs where local skills are available and the alleged security breaches.
Some of these issues were once raised by acting chairperson, Jane Mutasa, when she fell out with the major shareholder. Mutasa was simply dismissed as a disgruntled former board chairperson desperate to get back at her detractors at Telecel Zimbabwe.
In a response that did not answer questions on alleged security breaches in Zimbabwe, Telecel Zimbabwe said: "During a business review meeting between Telecel Zimbabwe, Orascom Telecom and Holdings (OTH) and VimpelCom that was held on 6th of February, and as a result of an on-going tender in two of OTH subsidiaries to introduce 3G and as a result of awarding the tender to new vendors for the Micro Wave subsystem, the management discussed the possible option of checking the feasibility of importing the swapped out Micro Wave equipment that was installed in 2012 and whether it was possible to use it in enhancing the rural coverage of Telecel Zimbabwe.
"This option was later declined and dropped after the meeting by all parties and was not put into action. All equipment deployed on the Telecel Zimbabwe network has been certified to be brand new and is subject to inspection by ZIMRA when it comes into the country as part of the normal importation process," Telecel noted.
The report alleged that expatriate appointments at Telecel had triggered internal rifts, with the executive pressing for the employment of local professionals.
Telecel Zimbabwe's outbound traffic is handled by Orascom's WIS Telecom, which experts said was expensive.
Mawindi, who was not available for comment, was in the process of engaging cost effective and efficient wholesale carriers to minimise international traffic costs before he was sacked in a boardroom coup in March this year.
The documents questioned the directive, and noted that the Orascom position was expensive to Telecel Zimbabwe.
C&M understands that an internal audit of the expatriate staff and external consultants' contracts with Telecel Zimbabwe initiated by management through the Mawindi's office had exposed the biased nature of the global recruitment policy within Orascom Telecom) as it relates to Telecel Zimbabwe.
The audit revealed that there was an "apparent imposition" of foreign workers who were each getting up to US$25 000 per term in school fees, against the CEO's US$8 000.
"There are a lot of qualified Zimbabwean CFOs looking for similar jobs but special consideration was only made to a foreigner," the document reads.
"A similar and typical case in point is the recent attempted forced appointment of the chief financial officer (CFO) from Egypt," said the report.
"The candidate's background was more on treasury activities than the specific requirements of the CFO position. This same candidate had been laid off from Orascom Egypt as part of the organisation's restructuring and downsizing," said the confidential report.
Confidential documents seen by Fingaz alleged that Orascom directed former chief executive officer (CEO), Francis Mawindi, to deal with Egyptian and Middle Eastern firms when purchasing network equipment.
Telecel's procurement policy, which, as alleged by a report presented to government last week, is controlled from Cairo, was also reported to be violating empowerment laws directing "all government departments, statutory bodies and local authorities and all companies" to "procure at least 50 percent of their goods and services…from businesses in which a controlling interest is held by indigenous Zimbabweans".
But it is the issue of possible security threats that could worry government, which has already put pressure on Orascom to localise at least 51 percent of shareholding in Telecel Zimbabwe in line with the country's economic empowerment law and terms given when it was awarded an operating licence over a decade ago.
"The group CEO from Orascom, Ahmed Abou Doma at some stage expressed the need for the local operation to look into the possibility of importing used network equipment from Pakistan and Bangladesh," alleged the report.
"This is tantamount to dumping and in any case the origin of this equipment also has security concerns," alleged the document.
"This was more of a directive (but) the major cost factor of the mobile communications business is interconnect and international charges.
"This obviously brings the issue of transfer pricing into play…"
But the report highlighted that there were "also security risks where there is the possibility of wiretapping as we go into the election season" as a result of the procurement policy.
The risk of wiretapping is linked to the outgoing international traffic where WIS Telecom, an Orascom subsidiary, is the only wholesale carrier handling Telecel's outgoing international traffic, Telecel Zimbabwe insiders confided.
"With this arrangement, the carrier has the capacity and capability to eavesdrop on communications going out of Zimbabwe and use this as intelligence gathering for the country's foes. This can also pose a potential threat politically as we go into the election season," said a Telecel Zimbabwe technician who declined to be named.
He explained: "On the other hand, the old equipment coming from volatile regions such as Pakistan or Bangladesh will obviously present a problem for Telecel in terms of higher maintenance and replacement co-sts and can be used to jam communications for subversive and other clandestine activities. Other mobile operators are heavily investing in the modernisation of their telecommunication networks and systems in response to the dynamic and ever changing dictates of the market where competitive advantage is now clearly defined by high quality communications networks, data and value added services."
Orascom has poured close to US$70 million in network expansion since mid last year.
Telecel's subscriber base moved to 2,58 million by end of December last year, from about two million at the end of June 2012. Orascom executives reportedly met Transport, Communications and Infrastructure Development Minister, Nicholas Goche two weeks ago to spell out their empowerment plan and discuss licence renewal issues following government threats to withdraw Telecel's licence unless it complied with indigenisation laws.
The Financial Gazette's Companies & Markets was told government officials were studying confidential documents that raised several concerns against Orascom's Zimbabwean strategy.
These include its procurement policy, expatriate recruitment in jobs where local skills are available and the alleged security breaches.
Some of these issues were once raised by acting chairperson, Jane Mutasa, when she fell out with the major shareholder. Mutasa was simply dismissed as a disgruntled former board chairperson desperate to get back at her detractors at Telecel Zimbabwe.
In a response that did not answer questions on alleged security breaches in Zimbabwe, Telecel Zimbabwe said: "During a business review meeting between Telecel Zimbabwe, Orascom Telecom and Holdings (OTH) and VimpelCom that was held on 6th of February, and as a result of an on-going tender in two of OTH subsidiaries to introduce 3G and as a result of awarding the tender to new vendors for the Micro Wave subsystem, the management discussed the possible option of checking the feasibility of importing the swapped out Micro Wave equipment that was installed in 2012 and whether it was possible to use it in enhancing the rural coverage of Telecel Zimbabwe.
"This option was later declined and dropped after the meeting by all parties and was not put into action. All equipment deployed on the Telecel Zimbabwe network has been certified to be brand new and is subject to inspection by ZIMRA when it comes into the country as part of the normal importation process," Telecel noted.
The report alleged that expatriate appointments at Telecel had triggered internal rifts, with the executive pressing for the employment of local professionals.
Telecel Zimbabwe's outbound traffic is handled by Orascom's WIS Telecom, which experts said was expensive.
Mawindi, who was not available for comment, was in the process of engaging cost effective and efficient wholesale carriers to minimise international traffic costs before he was sacked in a boardroom coup in March this year.
The documents questioned the directive, and noted that the Orascom position was expensive to Telecel Zimbabwe.
C&M understands that an internal audit of the expatriate staff and external consultants' contracts with Telecel Zimbabwe initiated by management through the Mawindi's office had exposed the biased nature of the global recruitment policy within Orascom Telecom) as it relates to Telecel Zimbabwe.
The audit revealed that there was an "apparent imposition" of foreign workers who were each getting up to US$25 000 per term in school fees, against the CEO's US$8 000.
"There are a lot of qualified Zimbabwean CFOs looking for similar jobs but special consideration was only made to a foreigner," the document reads.
"A similar and typical case in point is the recent attempted forced appointment of the chief financial officer (CFO) from Egypt," said the report.
"The candidate's background was more on treasury activities than the specific requirements of the CFO position. This same candidate had been laid off from Orascom Egypt as part of the organisation's restructuring and downsizing," said the confidential report.
Source - Financial Gazette
