MALAWI TELECOM BOARD HOLDS UP PRIVATIZATION

C O N F I D E N T I A L LILONGWE 001058

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STATE FOR AF/S JEANNE MALONEY
TREASURY FOR INTERNATIONAL AFFAIRS/AFRICA/BEN CUSHMAN
STATE FOR EB/IFD/ODF LINDA SPECHT AND ELAINE JONES
STATE PLEASE PASS TO MCC FOR KEVIN SABA
PARIS FOR D'ELIA
JOHANNESBURG FOR FCS

E.O. 12958: DECL: 12/19/2015
TAGS: EFIN KCOR ECPS ECON MI
SUBJECT: MALAWI TELECOM BOARD HOLDS UP PRIVATIZATION

REF: LILONGWE 1043

Classified By: Econoff W. Taliaferro for reasons 1.4b/d


1. (SBU) At what should have been a largely pro-forma meeting
on 15 December, the board of Malawi Telecommunications Ltd.
(MTL) voted down a proposal to privatize itself. The GOM,
its sole shareholder, signed the deal on 14 December,
together with all the other interested parties. Although
MTL's board had opposed the deal for some time, the new
board, meeting yesterday for the first time, surprised
everyone by refusing to accept the sale.

2, (C) This development is puzzling at best: why would the
new board, appointed by the Office of the President and
Cabinet, directly defy the GOM's position on the
privatization? One explanation, offered by a World Bank
negotiator on the deal, is that the new board was co-opted by
Minister of Information and Tourism Patricia Kaliati, an
opponent of the privatization. As reported earlier (reftel),
Kaliati is alleged by another reliable source to have been
supplied by the previous MTL board with an automobile for her
personal use for the past five months. It is not clear,
however, that Kaliati has any material leverage to induce the
board to defy the President.


3. (SBU) Though corruption is always a possibility, it may be
simply that the board members oppose the deal as a matter of
conscience, especially since the MTL management has long
taken the position that the company was grossly undervalued
and that staff retrenchments have not been adequately
addressed-- an eccentric perspective perhaps, but not
implausible. In view of the GOM's approval of the sale, the
board's position leaves it open to legal action for poor
corporate governance (i.e., acting in the interest of its
employees and management rather than its shareholders). To
pursue that angle, the other parties are meeting the board
today, with lawyers in tow.


4. (C) Neither the main buyer nor the World Bank seems to
regard the delay as threatening, unless the administration's
political opponents get stirred up about the deal. World
Bank country manager told Charge on December 18 that the
president "wants MTL off the table" and predicted that the
GOM would simply bypass the board and have the treasury
secretary sign the deal on the board's behalf. The MTL

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privatization is hugely unpopular, so Mutharika may be
secretly relieved to have the sale stalled, which in Malawi

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can easily become a permanent condition.
GILMOUR