In an aggressive move to re-assert itself in the telecom space, the Tanzanian government has reached a deal to buy back a 35% stake of the state-owned Tanzanian Telecommunications Company Limited (TTCL) from India’s mobile operator Bharti-Airtel in a transaction worth $7 million.
Telecoms as a sector is estimated to contribute close to 20% of Tanzania’s GDP. And TTCL is betting that its position as the manager of the country’s rapidly expanding fiber optic cable plus a new injection of capital into the business will attract investors and revitalize the company.
“At the moment TTCL is looking to implement its transformation program, with more than $120 million investment in infrastructure hardware and 4G LTE rollout,” Deputy Minister of Communication, Science and Technology January Makamba told Quartz.
In 2013, the government had approached Bharti, expressing interest in buying them out. But they balked at the $62 million price tag quoted. Airtel said that they were trying to recuperate the amount spent in 2001 to secure the stake in TTCL. But TTCL argued at the time that, Bharti was over-valuing the shares, especially after the losses the company had endured over the years.
“Their valuation model didn’t hold up to the reality of the state of the company. Also, it was clear that they hadn’t put any investment,” Makamba says. “There was stalemate in the negotiations and [the] figure represents a compromise so that everyone can move on and we can start reinvesting in TTCL.”
Another interesting dynamic in this whole deal? The Tanzanian government has a 40% stake in Bharti-Airtel‘s Tanzanian subsidiary, which could’ve been a leveraging factor in the negotiations.
TTCL, once a monopoly, has struggled to compete since the liberalization of telecoms and the arrival of private sector players in the early 1990s. At one point, TTCL controlled 60% market share. Now it barely has 300,000 subscribers of the 32 million mobile users in the country for its fixed line, mobile and data services.