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
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
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
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.