Econet's 3G coming slowly

By PETER GRIFFIN

Africa's Econet says its long-awaited plan to build New Zealand's third mobile phone network will not suffer from its bid to take over of Papua New Guinea's telecommunications monopoly.

Econet boss Strive Masiyiwa, who also owns Zimbabwe's Daily News, the newspaper banned for criticising the regime of President Robert Mugabe, defends his company's stop-start record here.

Econet gained access to cheap 3G spectrum in 2001 through its association with the Maori Spectrum Trust, but is yet to begin building a network.

"None of the other operators have built [third generation] networks yet but we're the ones who've been kicked around for not building one," Masiyiwa told the Herald from Johannesburg.

"We've almost been treated like criminals."

The Maori Spectrum Trust was given a Government grant of $5 million in 2000 and rights to buy a chunk of spectrum at a 5 per cent discount.

It invested most of the cash in Econet through its commercial arm, the Hautaki Trust, claiming Maori as a whole would benefit from the deal.

Masiyiwa said the public funding had overshadowed Econet's own contribution, pointing out that Econet spent $10.2 million of its own money.

Econet's plans for an advanced 3G network remained tightly guarded as Vodafone and Telecom set about building their own high-speed networks.

Masiyiwa said the Econet business plan always accounted for two other mobile players."We run our own race," he said.

That race extends to Papua New Guinea, where Econet is chasing the state-owned monopoly PNG Telikom.

Plagued with an inefficient structure and alleged corruption, PNG Telikom is seen as a potential cash cow for investors able to turn it around.

Econet has entered a controversial agreement with the PNG Government to take control. It will partly pay for the deal by entering a joint venture with South African company Altech, which will pay US$70 million ($108 million) for 50 per cent of Econet.

However, the deal is far from sealed and another player, Auckland-based IT company Datec, is vying for control. Datec joined Fiji-based Amalgamated Telecoms Holdings in 2002 to buy just over 50 per cent of the PNG carrier for PGK108 million ($54 million).

Although the agreement was signed, the deal was thrown into disarray with a change of government. The new administration headed by Sir Michael Somare reviewed privatisation law and annulled the deal.

Datec is now taking the PNG Government to court in an attempt to force it to honour its agreement.

Datec's chief executive, Michael Ah Koy, said confidentiality agreements and the court action meant he could not comment on the current sale.

"There is a court case pending in the High Court of Papua New Guinea in relation to the original deal we signed with the Independent Public Business Corporation."

Masiyiwa said the cash that would flow from the Altech deal would not just finance the PNG deal but would help the New Zealand operation as well.

"New Zealand progress is very much linked to the joint venture with Altech. We've planned for it, there's a business case but we've got to keep our cards to our chest," he said.

The Zimbabwe-born entrepreneur, now based in Johannesburg, is used to having to fight hard to get his way.

At present he is battling the Mugabe regime's gag on his newspaper, which had a daily circulation of 106,000 and was read by one million.

"I had a phone call one day to say the police had shut down the printing presses. We've been through six court battles and won all of them," said Masiyiwa, who had kept on his newspaper staff of 350 people and publishes on the internet.

"It's a sad story, but business isn't just about making money, we have to make a stand."

Econet is also just emerging from an ugly battle for the right to up its stake in its Nigeria operation. Nigeria is the jewel in the crown of Econet's telecoms empire, with one of the fastest-growing mobile markets in the world.

But it was effectively sidelined when Vodafone subsidiary Vodacom was granted management rights for Nigeria.

However, Vodacom earlier this year withdrew, claiming a "breach of trust" on behalf of its Nigerian partners.

A Government corruption investigation has since focused on the Nigerian management.

"David won the fight against Goliath, it was a nice little fight, very messy," said Masiyiwa.

"I'm not a saint but there are universal standards in the world and corruption is unacceptable in New Zealand as it is in Nigeria."

As in New Zealand, Econet lobbied hard to win regulatory concessions.

"In Kenya we had to fight for regulatory changes in order for a third player to come in."

The Econet story so far

2000: Maori Spectrum Trust gifted $5 million from the Government and rights to buy 3G radio spectrum.

February 2001: Mystery bidder Northelia pays $10.2 million for 2.5G radio frequencies in the Government spectrum auction - the frequencies are then transferred to Econet.

Mid-2001: Econet claims it has spent $25 million buying spectrum and developing its New Zealand business plan.

September 2001: Late submissions to the commerce select committee by Northelia and Hautaki Trust helps to win mobile regulatory concessions in the Telecommunications Act.

January 2002: Hautaki takes a 30 per cent stake in Econet for $4 million. Econet agrees to pay Hautaki at least $36,000 a year for tertiary academic scholarships and $24,000 for tertiary sports scholarships.

February: Government documents show a lack of Government monitoring of Econet's progress and overblown claims made early in the piece to win Government support.

June: Econet revealed to be in discussions to buy 50.1 per cent stake in PNG Telikom.

August: Altech agrees to buy 50 per cent of Econet, injecting US$70 million ($108 million) into the venture.