The exit of Multi-Links Telkom from Code Division Multiple Access (CDMA) business in Nigeria will cost it N15 billion (about $100 million) BusinessWorld Intelligence can now reveal. The company’s exit from CDMA business is occasioned by lack of adequate return on the several million of dollars investment in Multi-Links as well as “allegations of intentional destruction of value, corruption and manipulation of the company’s operations, policy and procedures.”
Our investigations reveal that the company’s operations in the last two years point to major contracts commissioned by Multi-Links that are “lynching the life out of the company.”
It is alleged that these contracts were signed without following corporate governance and procurement structures by some directors of Multi-Links.
The report claims these actions amount to misconduct and gross mismanagement by the directors involved and call for corrective measures to be taken including criminal charges against them.
Multi-Links has been a thorn in Telkom’s financial flesh ever since the company initially invested in Nigeria in 2007. The fixed-line operator has written the unit down by more than N150 billion since its entrance into Nigeria’s telecom industry.
Telkom recently disclosed its plans to get out of its struggling CDMA business in Nigeria, and was evaluating bids for Multi-Links’ CDMA business. Telkom spent about N80 billion (R3.2 billion) buying into Multi-Links between May 2007 and January 2009. However, Multi-Links has been problematic as it struggled to become profitable.
An internal disciplinary process has also been instituted against various employees for failing to comply with the company’s policies and for mismanagement. All disciplinary processes are a confidential matter between Telkom and the affected employees, and Telkom cannot disclose further details.
BusinessWorld Intelligence can also reveal that in order to gain better insight into the challenges confronting Multi-Links, Ernst & Young was contracted to review specific contracts concluded at Multi-Links which presented several commercial challenges. Forensic auditors at Ernst & Young were tasked by the Telkom board to perform an investigation into many aspects of Multi-Links, and this culminated in criminal and disciplinary processes being launched.
The findings of Ernst & Young investigations have been handed to the South African Police Services (SAPS) and the National Prosecuting Authority (NPA) for consideration. The SAPS and NPA have subsequently instituted criminal investigations into certain activities at Multi-Links.
Africa Prepaid Services Nigeria had a “super dealer agreement” with Multi-Links, which allowed it to acquire customers for Multi-Links’ CDMA network, as well as sell and market the range of its CDMA service and products for an exclusive 10-year period until December 2018.
Blue Label has a 36.72 per cent stake in the company through its 72 per cent ownership of Africa Prepaid Services, which owns 51 per cent of the Nigerian company. APS distributes bulk printed physical prepaid products and starter packs.
Blue Label said the termination, which has been accepted by the Nigerian company, is “unlawful and “constitutes a repudiation of its obligations in terms of the agreement”. As a result, Africa Prepaid Services Nigeria intends to sue to recover the damages it had, and will incur because of Multi-Links’ cancellation.