Vodacom Lesotho wins the first round in its battle with the LCA

Date: Oct 13, 2020

Vodacom's Lesotho unit has won the first round of a legal fight to hold on to its licence to operate in the country.

Vodacom, which has more than 85% of Lesotho’s market share, confirmed that it had secured an interim order interdicting the Lesotho Communications Authority (LCA) from enforcing the payment of the staggering R134 million($8.14m) fine it imposed on Vodacom Lesotho and revoking the company’s unified licence.

Vodacom said that in terms of the court order, the LCA must, on October 23, 2020, show cause why the interim order should not be made a final order of the court. A Vodacom spokesperson allayed fears of customers, saying that it remained business as usual.

“We assure citizens of Lesotho that we remain fully focused on delivering great value and a superior customer experience to the 1.2million people who have chosen us as their network provider of choice and the around 661000 M-Pesa users who rely on us for inclusive access to financial services. In other words, it remains business as usual for all our valued customers,” said the spokesperson.

The LCA accused Vodacom of flouting the country’s laws and lacked a sense of urgency in addressing grave compliance matters.

Things came to a head-on last Thursday when the LCA issued a notice of revocation providing them with 90 days in which to provide reasons why the licence should not be revoked.

At the centre of the accusation is the independence of Vodacom Lesotho’s external auditors. The LCA charged Vodacom for failing to appoint an independent auditor from 2015 to 2019, citing that a partner at the external audit firm was the sister-in-law to Matjato Moteane, Vodacom Lesotho chairperson.

The LCA reportedly believed that this meant that the audit firm was not independent enough and that its assessment of the company’s financials was likely compromised.

However, Vodacom Lesotho felt it was grossly unfair to be found wanting given that the partner in question was not part of audits performed.

It said it had no option but to seek relief in the courts because the LCA’s decisions imposing an excessive fine and the revocation of Vodacom’s operating licence were both erroneous as a matter of law and public policy.

Head of equities at Mergence Investment Managers, Peter Takaendesa, said that the market believed that Vodacom would engage with the relevant stakeholders and this issue would likely be resolved on reasonable terms given the long-term relationship the company has enjoyed with Lesotho.“

Vodacom Lesotho is the largest operator in the country and the group has to experience in dealing with related issues given its exposure to the DRC and Tanzania. We did not expect such a dispute closer to home, but telecoms companies in Africa normally experience these issues to varying degrees, with Nigeria being the most aggressive over the past few years,” Takaendesa said.

Vodacom shares rose 0.88%on the JSE yesterday to close at R124.42($7.56).



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