Econet demands $3.1 billion damages from Bharti Airtel

Ben Uzor Jr, with agency reports

Econet is seeking at least $3.1 billion in damages from Bharti Airtel in a dispute over ownership of its subsidiary Airtel Nigeria, according to a law suit filed on Wednesday. The move follows a federal high court ruling on January 30 that Bharti Airtel's ownership of its subsidiary Airtel Nigeria is "null and void" because co-founder and 5 percent shareholder Econet was not consulted on the transfer. South Africa-based Econet Wireless is disputing the Indian company's ownership of one of its top Africa operations. In 2003 Econet Wireless Limited, attempted to resist a takeover bid by Vodacom of Econet Wireless Nigeria (EWN) in which it owned 5 percent.

The sale to Vodacom however went through but Vodacom pulled out after citing irregularities in the takeover process. Besides, EWN was renamed V-Mobile and eventually a 65 percent stake was sold to Celtel, a division of Zain in 2006. Econet disputed the sale arguing that its pre-emption rights had been breached. Econet pursued the matter in the Nigerian courts in a bid to overturn the sale. In 2010, Zain sold its African mobile operations including Nigeria to Bharti Airtel for $10.7 billion.

Again, Econet sought to overturn this sale. The court has ruled that all actions and resolutions taken by the firm since October 2003, at which EWL was entitled to be notified and to participate in, as a shareholder, but was prohibited, are null and void. Bharti said last month that its stake in its Nigerian unit was "completely safe" and that the world's fifth-biggest mobile phone carrier by subscribers had appealed against the verdict."The claim for damages and equitable compensation against the Applicant and some of the Respondents might be in excess of $3 Billion," the document filed to the court said.

"The above estimated damages might also be in addition to a claim for $100 Million received by the Applicant as fees for the management of VNL (Vee Networks Limited, a former name of Airtel) for a period of 6 years which sum should have accrued." Bharti Airtel inherited the legal case as part of a $9 billion acquisition of Zain's Africa operations in 2010, including 65 percent of Zain Nigeria. The basis of Econet's claim is that its 5 percent stake was unfairly cancelled when Zain took control, so any decision made since then without it, including the transfer to Bharti, is void.

The Nigerian court upheld that claim. Nigeria contributes about 9.5 percent to Bharti's consolidated operational profits, the company says. Econet disputed the buyout of Airtel's stake from Zain Nigeria in 2010 because its right of first refusal over the stake was denied, in a dispute that had been ongoing since 2003, when the same assets were first sold to Vee Networks.

Published on Business Day, Tuesday 23 February 2012