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Evelyn Anite

ANALYSIS: How Minister Anite, Bemanya Fights Suffocated UTL Recapitalization Bid

The 6 companies that had been shortlisted include; Hamilton Telecom, Afrinet Communications Limited, Teleology Holdings, Neubacher Montage LLP, Baylis Consortium and Mauritius Telecom.
posted onJuly 18, 2018
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By Max Patrick Ocaido

The process to find a potential investor partner to recapitalize government’s crippling Uganda Telecom (UTL) would have been completed if UTL administrator Bemanya Twebaze did not embroil in broad daylight fights with state minister for Privatization, Evelyn Anite.

 

It has emerged that the process to select a potential partner that started early this year has stalled after Twebaze, who is also the Registrar General of Uganda Registration Services Bureau (URSB) unprecedentedly opposed minister Anite’s recommendations based on the due diligence report conducted by Financial Intelligence Authority (FIA), a government agency established by the Parliament to monitor, investigate, and prevent money laundering in the country.

The Government of Uganda represented by the Minister of Finance, Planning and Economic Development (MoFPED) and UCom are 31% and 69% shareholders respectively in UTL, which is financially distressed, technically insolvent and currently under administration. In May 2017, Bemanya, was appointed receiver-manager of UTL, a parastatal company which had failed to meet its financial obligations.

According to a Cabinet Memorandum CT (2018) paper titled “Update on the status of sourcing a strategic partner for Uganda Telecom Limited” that this website has accessed, the process of creditor verification was recently completed and UTL’s total liability is currently $147m (Over Shs550bn). From this $147m debt, government owned $53.61m, NSSF-$2.84m, ESATD/PTA Bank-$8.91m, UCECPS-$3.34m and $77.86m for Others.

SEARCH FOR INVESTOR PARTNER

As a result to this huge debt, cabinet found it prudent to look for a potential investor to partner with government to recapitalize UTL and the open bidding process was kick started early this year with hopes that by 22nd May 2018, a new investor would be in place to ‘resuscitate’ UTL. The job in search for a potential investor was left in the hands of Privatization minister Anite and UTL administrator Bemanya Twebaze who have since then failed to come to terms on which investor is suitable to recapitalize UTL.

“Considering that it proved impractical to finalize the administration process by the 22nd May 2018, the Administrator found it prudent to seek an extension from Court. This shall enable the Government to finalize the selection of a potential partner, transfer the assets to the new entity, settle creditors and address any other residual issues,” reads a confidential cabinet memorandum presented by finance minister Matia Kasaija.

Investigations have revealed that the 22nd May 2018 deadline for selecting a new investor partner became impossible after the administrator-Bemanya for reasons well known to him defied recommendations from Financial Intelligence Authority that carried out final company analysis and financial due diligence for all the companies that had been shortlisted.

The 6 companies that had been shortlisted include; Hamilton Telecom, Afrinet Communications Limited, Teleology Holdings, Neubacher Montage LLP, Baylis Consortium and Mauritius Telecom.

“As directed by Cabinet I requested the Financial Intelligence Authority to conduct a due diligence on the potential investors and it has issued a report to that effect dated 25th May 2018, (copy attached and marked “A”). This report has been shared with the Administrator UTL for his action,” the cabinet memorandum presented by Kasaija reads.

According to the FIA report signed by its Executive Director Sydney Asubo dated May 25, 2018, out of the 6 shortlisted companies; only one company [Mauritius Telecom] was the best option available despite offering the lowest assets of $45m.

“We have not received any adverse information related to non-compliance with any regulatory requirements. In addition, the Financial Intelligence Authority has not received any reports on this company [Mauritius Telecom] indicating possible involvement in money laundering or terrorist financing,” Asubo’s report to Anite reads.

The report adds, “In view of the foregoing, it is our considered option that Mauritius Telecom is a financially stable company with credible shareholders whose funding sources are clearly known, and would be a variable investment partner with the Government of Uganda.”

ANITE, BEMANYA FIGHT DEEPENS

It is upon FIA report that minister Anite updated cabinet and carried the report’s recommendations to give the contract to Mauritius Telecom, whose 33.5% shares belong to the government of Mauritius.

Whereas all seemed smooth, the process turned tedious after UTL administrator, Bemanya rejected the move to award the contract to Mauritius Telecom.

“The Administrator [Bemanya] has evaluated the proposals and has made a report to that effect…. Subsequent to these decisions, the Administrator further engaged the potential partners with the aim of revising their offers upwards,” Kasaija’s report to cabinet reads.

The Administrator [Bemanya] has had the benefit of reading the report of the FIA and its misgivings about dealing with the other companies other than Mauritius Telecom Ltd. The Administrator notes that according to the Insolvency Act the duty of the Administrator is to get the highest amount of money for the creditors.  He notes that all the offers are below the assessed market value of the company which is currently equivalent to US$ 80M. In light of his duty to get the best return for the creditors, he proposes to select the best three potential partners and engage them further with a view to revise their offer upwards. A final offer will be made to a partner with the highest offer,” the cabinet memorandum reads.

According to this cabinet memorandum, Bemanya proposes that an option to purchase (offer) should be given to the highest offering partner with strict conditions including a requirement to pay 10% of the proposed amount (non-refundable) upon signature of the agreement; and if he fails to pay within the time stipulated, the 10% will be forfeited, offer automatically lapse and the next evaluated partner considered, in a descending order.

Bemanya’s proposal has received wide objection from ministry of finance who recommended to cabinet that, “The Administrator awards and finalises with Mauritius Telecom as the only credible potential partner with Government as recommended by the Financial Intelligence Authority.”

According to Bemanya’s evaluation report of all the potential investors, the best 3 companies that should be considered for the contract depending on the offer is Hamilton Telecom ($70m), Afrinet Communications Limited ($67m) and Teleology Holdings ($60.5m).

However, Afrinet Communications Ltd which had offered the second best purchase price of $67m has confirmed to finance ministry that they have withdrawn their participation.

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