Multi-Links future in doubt as deal with Visafone is cancelled

South African incumbent operator Telkom has cancelled its planned sale of Nigerian subsidiary Multi-Links to Visafone. Having announced a done deal to the tune of $52m in April this year, Telkom CEO Nombulelo Moholi has said that a recent court ruling in Nigeria now means that the South African company is unable to go through with the deal. Consequently, Telkom will stop funding the subsidiary with immediate effect, leaving the future of the company in doubt.

The court judgment in question relates to a dispute between Multi-Links and Helios Towers, which built the towers leased by the telco. The pair had a ten-year contract for co-location and site leasing but three years into the agreement, Multi-Links backed out, claiming the contract wasn’t binding as it had not been signed by a Nigerian government official. Helios took the matter to court, demanding $250m in contractual payments. Multi-Links hit back with a suit of its own, claiming breach of agreement. Last week, Multi-Link’s suit was dismissed, with the judge telling the telco to honour its agreement with Helios.

Controversially, it has emerged that Helios had obtained an injunction barring the sale of Multi-Links until the dispute was settled. Multi-Links and Telkom are strenuously denying claims that this information was concealed from both Visafone and the Johannesburg Stock Exchange (JSE). It is also being claimed that Multi-Links failed to inform Visafone of a court order barring its transactions; the former says that order had lapsed before its agreement with Visafone.

Whatever the veracity of the claims and counter-claims, the deal is off, leaving Telkom’s books with a gaping hole where hundreds of millions of Rands used to be; the company has written Multi-Links’ value down to zero. The South African telco abandoned its CDMA operations in Nigeria last year following heavy operating losses. CDMA accounted for 90 per cent of Multi-Links’ business.

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