eBusiness Weekly
Martin Kadzere
NetOne is reported to have re-engaged Chinese telecoms giant ZTE over the supply a billing system, five months after its board declared force majeure on the contract it had awarded to the company in 2017 due to currency reforms which saw the country removing the 1:1 peg for its surrogate bond notes and electronic dollars in February last year, it has been established.
NetOne insiders said the removal of the official peg rendered the system “unaffordable” for the country’s second largest mobile phone operator and the board resolved to terminate the contract.
The clause of force majeure, loosely translated as superior force, allows certain terms of a legally binding agreement to be ignored due to “unavoidable circumstances”.
The board had suggested that instead of ZTE acquiring a new system at a cost of about US$12 million, an upgrade of the existing system should just be done. This was going to cost about US$4 million and would also avoid the big risk of moving data between different vendors, which is a “very difficult exercise at the best of times”, sources have said.
Business Weekly is reliably informed that there are some manoeuvres by a few board members — with the backing of senior politicians and Government officials to revive the “costly” ZTE deal.
Currently, the NetOne board has only three members after three directors —including its chairman James Mutizwa resigned in February this year.
Dr Douglas Mamvura, who was never invited for a single board meeting since his appointment in October last year, and another board member are said to have been fired early this month for alleged misconduct.
The ZTE billing deal was proposed February in 2017, only two months after NetOne had been signed a billion agreement with Formula Telecom Solution on December, 21 2016. The FTS agreement was subsequently unlawfully terminated in July 2017. NetOne has since lost an arbitration case against FTS in the London International Court of Arbitration and must now pay about US$6 million even though they never delivered anything,
“The currency reforms rendered the ZTE billing agreement unaffordable for NetOne,” a source with knowledge of the matter said. “This situation had been envisaged in the agreement, and a way of disengaging was in the agreement in the event that there was a force majeure.
“The ZTE billing system agreement termination decision was made by a board of seven directors after much deliberation about what is in the best interests of NetOne and of Zimbabwe, given the scarce foreign currency in the country. Therefore a reversal of this decision is not in the best interest of NetOne nor of Zimbabwe. The board of seven people had suggested that instead of ZTE an upgrade of the existing systems should just be done. This was going to cost about US$4 million and would also avoid the big risk of moving data between different vendors, which is a very difficult exercise at the best of times.”
On 13 February, this year, ZTE sent a letter dated 4 February 2020 to NetOne chief executive Lazarus Muchenje stating that they disagreed with the termination of their billing agreement and wanted a meeting to come up with an amicable resolution to the problem.
Subsequent to this letter, the CEO was suspended, and engagements with ZTE are said to have started.
“These engagements include reviewing whether the ZTE system is superior to one of the existing systems, which had been proposed by the board for an upgrade. An analysis that is not relevant as the real question should be about whether NetOne can afford the ZTE system or not. And not whether the ZTE system is superior or not to systems that were implemented almost 10 years ago,” another source said.
“With ZTE who had failed to deliver a system in two years, it could be catastrophic,” added another source.
NetOne acting board chairperson Susan Mutangadura did not respond to calls seeking comment.
