wikileaks ico  Home papers ico  Cables mirror and Afghan War Diary privacy policy Privacy
Identifier
Created
Classification
Origin
06LILONGWE104
2006-02-03 07:52:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Lilongwe
Cable title:  

MALAWI TELECOM PRIVATIZED--FOR REAL

Tags:   EINV  ECPS  ECON  MI 
pdf how-to read a cable
VZCZCXRO4733
RR RUEHDU RUEHJO RUEHMR
DE RUEHLG #0104 0340752
ZNR UUUUU ZZH
R 030752Z FEB 06
FM AMEMBASSY LILONGWE
TO RUEHC/SECSTATE WASHDC 2313
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHFR/AMEMBASSY PARIS 0082
RUEHLO/AMEMBASSY LONDON 0190
RUEHJO/AMCONSUL JOHANNESBURG 0187
RUEAIIA/CIA WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHDC
RUEATRS/DEPT OF TREASURY WASHDC 0423
						UNCLAS LILONGWE 000104 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR AF/S G. MALLORY
STATE FOR EB/IFD/ODF LINDA SPECHT AND ELAINE JONES
TREASURY FOR INTERNATIONAL AFFAIRS/AFRICA/BEN CUSHMAN
PARIS FOR D'ELIA
JOHANNESBURG FOR FCS

E.O. 12958: N/A
TAGS: EINV ECPS ECON MI
SUBJECT: MALAWI TELECOM PRIVATIZED--FOR REAL

REF: A. 2005 LILONGWE 1048


B. 2005 LILONGWE 1053

This message is sensitive but unclassified--not for Internet
distribution.



1. (U) After last-minute delays in December and January, the
privatization of Malawi Telecommunications Ltd. is finally
going through. The buyer, Telecommunications Holdings Ltd.,
put down a $1 million earnest-money deposit last week and has
followed that with $10 million more this week. The total
sale price is $39 million (ref A). Formal transfer of
ownership is a cascading process, but with the $10 million
payment, the deal is essentially irreversible from both
sides. A transition management team from THL is reportedly
in place already.



2. (U) After a brief last stand in mid-December (ref B),
MTL's board capitulated when they were reminded by the
finance ministry that the government was the sole shareholder
and wanted to sell. As the sale reached its final approval,
the board's resistance was briefly buoyed by a flurry of
anti-privatization articles in the press. Although THL was
slow to react in public, it quickly executed a
behind-the-scenes campaign amongst parliamentarians to
pre-empt any populist move to stop the sale. The case for
privatization is compelling for all but the most ardent
statists: with one of the lowest penetration rates in the
world, a three-year backlog for new lines, high rates, and
poor service, MTL was ripe for reform. Eventually, THL did
state its case in the press, and it appears to have won some
measure of public support.



3. (U) MTL's assets include a 40 percent stake in mobile
service provider Telekom Networks Malawi. The other 60
percent was owned by Telekom Malaysia Berhad until late last
week, when the South African Econet Wireless announced that
it was buying out the Malaysian share for $24.5 million.
Telekom Malaysia had been trying to sell for about a year,
with no takers until now. While this deal has re-awakened
some of the privatization's critics, to us it looks more like
a validation of the MTL sale: no one wanted to be a business
partner with the government, but with a private corporation
taking over MTL, the future of Telekom Networks looks better.
THL has said that it intends to sell its share of Telekom
Networks.



4. (SBU) COMMENT: The bumps in the road to closing the MTL
deal are indicative of two facts of life here. First,
businesses of any size in Malawi are subject to the vagaries
of political meddling, resulting in arbitrary delays for
reasons that are anything but transparent. The MTL deal
played this fact out on a grand scale, with the President
intervening on the closing date to ensure that his
state-owned media were not cut off for failure to pay their
bills. While this is especially true of the privatization of
a large parastatal enterprise, it is also true at other
levels of the economy. The institutions of commerce and
government simply do not have the weight to fend off
politicians, and they suffer from random setbacks and delays.



5. (SBU) Second, privatization is wildly unpopular here. It
is generally portrayed as a draconian measure imposed by
foreigners, which delivers crucial public services and assets
into the hands of businessmen accountable to no one.
Somehow, "the West" is thought to profit from privatizations.
In one recent editorial against the possible (and badly
needed) privatization of the Blantyre Water Board, the author
reasoned that a private company could poison the water
supply, and everyone in Blantyre could die. In fact, in
Malawi it has generally been the government that is
unaccountable and the private sector that is predictable and
responsive. But despite the President's official approval of
further privatizations, the government done little so far has
to warm the public to the idea.
GILMOUR