Shareholders take Airtel Malawi to task
Two shareholders of Airtel Malawi plc are seeking directions of the High Court for Malawi Communications Regulatory Authority (Macra) to either revoke or suspend the company’s business licence due to alleged non-compliance with the local ownership requirements.
The two—Frank Harawa and Chandrakant Makadia—allege that the multinational mobile telecommunications network operator flouted the Communications Act by offering more than 80 percent of its shareholding to foreigners.
The disgruntled shareholders already dragged Airtel plc to court in March this year for alleged breach of disclosure requirements in its initial public offer (IPO) and wanted the company to be de-listed from the Malawi Stock Exchange (MSE).
The case went for mediation in May following an inter-partes hearing after High Court Judge Jabbar Alide heard an application for security for costs by the telecommunications company, which was later dismissed.
The shareholders’ lawyer Burton Mhango confirmed in an interview that his clients now want their statement of case and summons amended following the termination of mediation after the parties failed to engage in a meaningful discussion to resolve the matter.
“I have, indeed, received instructions from my clients to amend the statement of case and summons and to add reliefs bordering compliance with section 35 of the Communications Act,” he said.
Section 35 of the Act stipulates that “an electronic communications licensee shall maintain a local shareholding of at least twenty [20] per cent”, a condition the mobile service provider allegedly failed to meet.
However, Mhango explained the mediation termination did not mean the parties might not consider resolving the matter outside court.
Mediation is a form of alternative dispute resolution (ADR), a forum where parties to the case are given opportunity to resolve their dispute without necessarily going for trial.
“The termination of mediation is the appropriate legal process in this situation. However, if the parties themselves feel the need to talk and resolve their difference, they can still do so even though the mediation has been terminated,” said Mhango.
According to the certificate of termination of mediation, Alide, who was the mediator, ended the mediation following the parties’ failure to agree on settlement terms.
“The matter is, therefore, referred back to the High Court (Commercial Division) to proceed with other court processes in terms of the Courts (Mandatory Mediation) Rules 2004,” reads the certificate, dated September 27 2021.
According to Mhango, the next stage of the case is the scheduling conference, where the High Court will give direction for trial.
The two stakeholders argue that Airtel Malawi was under obligation to comply with Section 35 of the Act and plead that in breach of the section, the company “knowingly and or negligently neglected” to offer the required 20 percent of its shares for local shareholding.
As such, they want the court to declare that the company did not comply with licence requirement as per the section, therefore, must be penalised under Section 43 of the Communications Act, which among others, states that Macra may suspend or revoke a licence if the licensee has failed to comply with the Act or has contravened the provisions of any other written law relevant to the communications sector.
Harawa and Makadia, in a Commercial Case Number 83 of 2021, sued Airtel and its six directors for allegedly concealing to prospective investors information about a K5.7 billion court case when it was being listed on the stock market.
The six directors are Plastone Alex Chitsime, Charles Mustafa Kamoto, Alok Bafna, Ian Ferrao, Neelesh Pratap Singh and Kayisi M’bwana Sadala.
The two shareholders contended that the concealment, including botched profit forecast, deprived them and other potential investors a fair and reasonable opportunity to assess the potential loss that the company could suffer and clear reflection of its liabilities if found liable in the said pending litigation.
The case in question, currently in the Supreme Court of Appeal, relates to a K5.7 billion demand by the Malawi Revenue Authority (MRA) from Airtel Malawi as non-resident tax, dating to 2012.
Lawyer for Airtel Malawi, Ralph Mhone, in a brief interview yesterday, confirmed that the mediation was terminated at the claimants’ request “and not Airtel’s wish.”
He said: “They feel the matter should not be mediated out of trial, so we could not say no if one of the parties thinks so.”
In 2019, Macra fined Airtel Malawi K820 million for breaching the same local shareholding obligations.
Just this week, the Competition and Fair Trading Commission (CFTC) fined the company K2.1 billion for what they described as “unconscionable conduct” in the Khethekhe bonus system. But the company is appealing against the fine.
