JSE-listed Blue Label Telecoms said on Monday it has decided to terminate its business activities in Nigeria. This follows the cancellation of a contract in that country with Telkom subsidiary Multi-Links.
Blue Label co-CEO Mark Levy says the decision will allow it to redeploy resources to its other international businesses, in particular India and Mexico.
The company has an effective 36,72% stake in Africa Prepaid Services Nigeria through its 72% shareholding in Africa Prepaid Services. The former signed a 10-year contract with Multi-Links in 2008 for the exclusive distribution of its wireless products to the Nigerian market.
Telkom announced on Monday that it intends to stop funding Multi-Links’s operations immediately after a plan to sell its wireless assets to Nigeria’s Visafone fell through following legal action from Multi-Links supplier Helios Towers.
Michael Campbell, head of investor relations at Blue Label, says the company isn’t unduly worried by Telkom’s announcement and the effect it may have on Blue Label successfully suing Multi-Links/Telkom.
Concerning the possibility that Telkom may liquidate Multi-Links, Campbell says that that outcome remains “conjecture and speculation”. He says Blue Label won’t comment on Telkom’s business decisions, adding that the legal process is underway and will take some time to run its course.
“The contract requires an arbitration process,” he says. “We are in the process of quantifying the extent of our claim. We’re working out the balance of an eight-year contract — what we would’ve put in, got out, and looking at the growth forecasts for that time.”
Campbell says the next stage of the process is to work with Multi-Links to agree upon the arbitrators. “There’s no deadline for the guys here or in Lagos to submit the numbers. We want to make sure everything is done properly.”
He says Blue Label decided to pull out of Nigeria given that “it’s very much a physical market [and] Blue Label is now a world expert in the virtual market”.
“Also,” he says, “we’re a minority shareholder with less than 37%. We had to ask ourselves whether the effort was worth our while. Weighed up against Mexico and India, Nigeria simply doesn’t stack up.”
He says Blue Label “may have a buyer for all or part of the business in Nigeria”. But he says, that is “not to be confused with the purchase or sale of our share in that business. We may have a buyer for some of the assets, though. For now we are consulting stakeholders and letting them know we won’t be around to service distribution and other agreements.” — Craig Wilson, TechCentral