Vodafone subsidiary Vodacom in legal dispute

Vodafone subsidiary Vodacom in legal     dispute

Vodafone is at the centre of legal dispute in the Democratic Republic of Congo (DRC), where its Vodacom subsidiary stands accused of fraud, usury, breach of trust and forgery by a joint venture partner.

The court case threatens to be a setback for Vodafone's plans to expand in Africa, where it has built up a 65% stake in Johannesburg-listed Vodacom, and also threatens to drag the company into a corporate governance controversy.

Vodacom holds 51% of the Vodacom Congo joint venture in the DRC, a war-torn country of almost 70 million people. Only a fraction of the population has access to a mobile phone or landline - as a result the DRC is seen as a massive opportunity by telecoms operators.

The remaining 49% of the joint venture is held by local operator Congolese Wireless Network (CWN), which has filed papers in the High Court of Kinshasa, the DRC's capital city, accusing Vodacom of abusing its dominant position.

Among other allegations, CWN claims Vodacom International has raised a debt facility from Standard Bank to the tune of £120m. Much of this money about £111m, according to CWN, has been loaned, in turn, by Vodacom International to Vodacom DRC, with the former levying interest, intermediary fees, and other charges on the latter.

CWN claims that between 2002 and 2009 it paid Vodacom, £71.5m in interest, £38m of guarantee fees and facility fees of £7.28m on these loans. It also claims it made other payments, including £17.42m in technical assistance fees and £26.82m in transmission rental fees.

CWN claims it has not had sight of the original agreement between Vodacom International and Standard Bank and wants to see it.

Vodacom has rejected the allegations insisting any litigation by CWN is entirely without merit and a contrived attempt to force Vodacom disproportionately to fund further investment.
Written by Mobile Today
Mobile Today

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