probe Vodafone
Source: Business Daily, March 9. 2007
Written by Mutiga Muriithi
Detectives from the UK’s Serious Fraud Office are in Nairobi to probethe shareholding structure of Kenya’s largest and most profitable company, Safaricom.The visit comes four months after it emerged that the mobile phone operator has a mysterious shareholder, MobiteleaVentures Ltd, with a five per cent stake in one of Safaricom’s parent companies, Vodafone Kenya. The circumstances surrounding this shareholding have raised questions, and triggered a parliamentary enquiry into the ownership changes.Mobitelea had not previously been disclosed as a shareholder in the deal, which officially ascribed 60 per cent of Safaricom to Telkom Kenya and 40 per cent to Vodafone UK, through its local and wholly owned subsidiary Vodafone Kenya. When the shareholding structure was agreed, both Kenyan parties held pre-emptive rights. It was agreed that should Vodafone UK or Telkom Kenya ever wish to sell any part of their stake, an offer would first be made to the other partner.However, in Vodafone UK’s accounts in 2003, it was revealed that Vodafone Plc had bought back 5 per cent of the shares in Vodafone Kenya from Mobitelea. It has not yet come to light how Mobitelea came to own this stake, or who it paid for it. The Public Investments Committee (PIC) has been leading an effort to establish whether there was any fraud in Mobitelea’s acquisition of the shares.
Until now, such investigations have been carried out only in Kenya, with a focus on questioning Safaricom and Kenyan government officials. The arrival of the UK Serious Fraud Officers in Nairobi marks a move by the British authorities to investigate the probity of Vodafone itself in the arrangement. Vodafone UK has declined to answer queries as to who the principals of Mobitelea Ltd are or how the company came to own its $20 million (Sh1.4 billion) stake, citing confidentiality. However, a report in the UK’s Guardian newspaper said the company’s owners are shielded behind two nominee firms, Guernsey-registered Mercator Nominees Ltd and Mercator Trustees Ltd. Directors of the company are named as Anson Ltd and Cabot Ltd, based in Anguilla and Antigua. A British High Commission spokesperson yesterday confirmed that officials from the Serious Fraud Office are in town. She would not disclose their mission citing a longstanding government policy not to discuss specific cases. The Serious Fraud Office is a UK government department which falls under the country’s Criminal Justice System.It generally takes the lead in investigating corruption involving UK companies overseas. The unit was recently in the news for leading a high-profile investigation into arms deals between Britain’s giant BAE systems company and Saudi Arabia, which threatened to strain diplomatic ties between the two countries. The team of detectives in Nairobi is expected to probe a number of cases involving British companies, including the saga revolving around the Anglo Leasing and Finance Company -- the shell firm at the centre of a number of securityrelated procurement scandals in Kenya. The UK is a signatory to the OECD convention on combating corruption by multinational companies.The convention outlaws the offering of bribes by UK firms to foreign companies or to government officials.The deal between Vodafone UK and Mobitelea has drawn the interest of authorities in Britain because it could represent a breach of such commitments. The convention came into force in 1999 and is “aimed at reducing corruption in developing countries by sanctioning bribery in international business transactions carried out by companies based in the convention member countries.”Britain subsequently put in place legislation operationalising the act in the UK. These include the Proceeds of Crime Act 2002, the Extradition Act and the Judicial Cooperation Act 2003, and the Financial Services Authorities Act 2003. An OECD report into its implementation of the convention last year praised the UK for its “exemplary transparency, professionalism and co-operation”. The Mobitelea saga came into the open when our sister paper, The East African, published a report in November pointing out the mystery firm had acquired a stake in Safaricom through Vodafone UK. The revelations appeared to surprise even Kenya government officials who up until then had not known details surrounding Vodafone’s Safaricom deal which was clinched under the Kanu regime between 1999 and 2000.The Guardian subsequently reported that Mobitelea was registered on June 18, 1999 – several months after Vodafone had struck a preliminary deal with the Kenyan government. The company was paid US$ 5 million (Sh360 million) in cash and given a five per cent stake.Safaricom is one of Kenya’s best run and most profitable companies. Following Vodafone’s acquisition of a stake in the company, it swiftly established itself as a market leader in the country through a combination of clever market positioning and aggressive branding. Last year, the company recorded a Sh12 billion profit – a Kenyan record. However, the saga surrounding its ownership structure threatens to cast a long shadow on an eagerly anticipated Initial Public Offer (IPO). The Cabinet has approved government plans to reduce its 60 per cent stake in the company. The IPO is expected later this year.
Until now, such investigations have been carried out only in Kenya, with a focus on questioning Safaricom and Kenyan government officials. The arrival of the UK Serious Fraud Officers in Nairobi marks a move by the British authorities to investigate the probity of Vodafone itself in the arrangement. Vodafone UK has declined to answer queries as to who the principals of Mobitelea Ltd are or how the company came to own its $20 million (Sh1.4 billion) stake, citing confidentiality. However, a report in the UK’s Guardian newspaper said the company’s owners are shielded behind two nominee firms, Guernsey-registered Mercator Nominees Ltd and Mercator Trustees Ltd. Directors of the company are named as Anson Ltd and Cabot Ltd, based in Anguilla and Antigua. A British High Commission spokesperson yesterday confirmed that officials from the Serious Fraud Office are in town. She would not disclose their mission citing a longstanding government policy not to discuss specific cases. The Serious Fraud Office is a UK government department which falls under the country’s Criminal Justice System.It generally takes the lead in investigating corruption involving UK companies overseas. The unit was recently in the news for leading a high-profile investigation into arms deals between Britain’s giant BAE systems company and Saudi Arabia, which threatened to strain diplomatic ties between the two countries. The team of detectives in Nairobi is expected to probe a number of cases involving British companies, including the saga revolving around the Anglo Leasing and Finance Company -- the shell firm at the centre of a number of securityrelated procurement scandals in Kenya. The UK is a signatory to the OECD convention on combating corruption by multinational companies.The convention outlaws the offering of bribes by UK firms to foreign companies or to government officials.The deal between Vodafone UK and Mobitelea has drawn the interest of authorities in Britain because it could represent a breach of such commitments. The convention came into force in 1999 and is “aimed at reducing corruption in developing countries by sanctioning bribery in international business transactions carried out by companies based in the convention member countries.”Britain subsequently put in place legislation operationalising the act in the UK. These include the Proceeds of Crime Act 2002, the Extradition Act and the Judicial Cooperation Act 2003, and the Financial Services Authorities Act 2003. An OECD report into its implementation of the convention last year praised the UK for its “exemplary transparency, professionalism and co-operation”. The Mobitelea saga came into the open when our sister paper, The East African, published a report in November pointing out the mystery firm had acquired a stake in Safaricom through Vodafone UK. The revelations appeared to surprise even Kenya government officials who up until then had not known details surrounding Vodafone’s Safaricom deal which was clinched under the Kanu regime between 1999 and 2000.The Guardian subsequently reported that Mobitelea was registered on June 18, 1999 – several months after Vodafone had struck a preliminary deal with the Kenyan government. The company was paid US$ 5 million (Sh360 million) in cash and given a five per cent stake.Safaricom is one of Kenya’s best run and most profitable companies. Following Vodafone’s acquisition of a stake in the company, it swiftly established itself as a market leader in the country through a combination of clever market positioning and aggressive branding. Last year, the company recorded a Sh12 billion profit – a Kenyan record. However, the saga surrounding its ownership structure threatens to cast a long shadow on an eagerly anticipated Initial Public Offer (IPO). The Cabinet has approved government plans to reduce its 60 per cent stake in the company. The IPO is expected later this year.
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