Lesotho- Vodacom, LCA row over fees

 A disagreement over an annual fee has soured relations between Vodacom Lesotho and the Lesotho Communications Authority (LCA).
Now Sekhametsi Investment Consortium, the local company that owns 20 percent of Vodacom Lesotho, has entered the fray.
In a statement to shareholders this week Sekhametsi insinuated that the LCA was targeting Vodacom Lesotho.
What seems to have triggered the quarrel was how much Vodacom Lesotho should pay in annual fees to the LCA.

The annual fee is four percent of the mobile network company''s net operating income.
It is based on the annual audited financial statements mobile network companies are required to submit to the regulator.
thepost understands that the fight started after the LCA gave Vodacom Lesotho the bill for the annual fees.

Vodacom Lesotho disputed the figure, saying it was based on wrong calculations of its net operating income.
The company argued that the LCA had based its calculations on the net operating income that included Mpesa, its money transfer service.
Their reasoning was that income from Mpesa services should be discounted because it was not earned from core network operations. The company said Mpesa was a financial product, not a telecommunications one.

The correct calculation, the company argued, should be based on what the company earned from voice and data services.
The LCA however had a different interpretation, arguing that additional services like Mpesa formed part of the company''s income because they are driven by its network operations.
As the haggling continued Vodacom Lesotho missed the deadline to pay the fees. And when it eventually did, the regulator slapped it with an M8.2 million penalty for non-compliance.
Vodacom Lesotho then sued to challenge the penalty, arguing that it was unfair.

The High Court is likely to hear the case in March. Sekhametsi says the LCA overcharged Vodacom Lesotho by M8 million after refusing to allow the company to discount the Mpesa revenue from the net operating income from which the fee was to be charged. This, says the consortium, has deprived Vodacom of a net profit of M14 million.
That translates into M2.8 million lost in potential dividends to Sekhametsi''s shareholders.

An attempt to resolve the matter out of court seems to have fallen through and matters appear to have escalated since then.
Late last year the regulator issued a statement, announcing the penalty on Vodacom Lesotho.
Sekhametsi tells its shareholders that that statement has a ''reputational damage'' on Vodacom and further strained relations between the company and the LCA.
Such statements are however not unique to Lesotho.

In other countries regulators routinely name and shame companies that offend regulations.
Press statements announcing companies that would have failed certain regulator tests are not uncommon.
The only difference in Lesotho is that the LRA has not been known to publicly wield the stick.
In December the LCA slapped Vodacom Lesotho with two enforcement letters for allegedly breaching its Universal Access Fund obligations and keeping auditors who are allegedly not independent enough.

On the Universal Access Fund the LCA alleged that Vodacom Lesotho failed to submit a performance report on the contract it has with the regulator to supply internet services to 60 schools across the country. Vodacom Lesotho argued that the contract was not specific on what report should be submitted.
It has however submitted the report and Sekhametsi says it hopes the LCA ''will not impose another penalty''.
On corporate governance the LCA took issue with the fact that Vodacom Lesotho''s chairman is related to a partner of the company''s auditors.
This, the regulator''s is said to have insisted, meant that there was no independence.

Vodacom Lesotho''s Managing Director, Phillip Amoteng, met LCA chief executive, Mamarame Matela, yesterday to discuss some of the issues.
Last night Amoteng refused to reveal what was discussed, only saying ''this was one of the routine meetings that companies have with the regulator''.
thepost however understands that one of the issues on the agenda was a promotion Vodacom Lesotho wants to launch.
Amoteng was keen to downplay the alleged dispute, pointing out that Vodacom Lesotho was ''constantly engaging the LCA on regulatory issues''.
Senior LCA officials were also reluctant to characterise the differences as a dispute.

They said these were simple and routine regulatory issues that ''should not be a cause for panic''.
One of them said such interaction between mobile companies and regulators ''are common all over the world and across other sectors''.
''There is nothing sinister with the way the LCA had handled Vodacom affairs. All is in good faith,'' he said.
Sekhametsi too treaded cautiously. It said the regulator''s proceedings ''need to consider the wider socio-political and economic context''.
''The arbitrary restraint of Vodacom Lesotho rights, as well as Telecoms Sector as a whole, could have negative impacts on the Sekhametsi shareholder value chain,'' the consortium says in the statement.

It says it was taking a multi-pronged approach to resolve the impasse.
It says Vodacom Lesotho and its shareholders will assure the regulator of the company''s commitment to prioritise compliance with the licence conditions.
The investment company says it will seek a ''fair regulatory enforcement framework'' from the LCA.
Sekhametsi also said it will ask Communications Minister Thesele ''Maseribane to help ease the tensions between the LCA, Vodacom Lesotho and other network operators.

This, it says, is in addition to the minister setting a coherent policy direction for the sector.
Last night Sekhametsi''s chairman, Leboela Letebe, said he did not want to speculate on social media rumours that there was a political hand in the dispute.
He said the consortium was not aligned to any political party.

''We are only interested creating investment opportunities for Basotho from all walks of life,'' Letebe said, adding that ''we work with the government of the day''.
''We only seek a conducive investment climate. We are clear about our commitment to good corporate governance,'' he said.
''We assist our strategic investment partners with compliance matters. We therefore encourage negotiations between Vodacom and the regulator.''