NetOne loses arbitration case against FTS

By Staff reporter | 08 Mar 2020 at 18:11hrs
NetOne
NetOne has lost an arbitration case against payments solutions provider Formula Telecom Solutions (FTS) in the London International Court of Arbitration following a row over the mobile operator's cancellation of an agreement for the supply of a billing system three years ago.

The judgment was passed by an arbitrator in the United Kingdom a few weeks ago, ordering NetOne to pay Israel -based FTS US$5 million (about $100 million) in compensation, according to documents perused by The Sunday Mail Business. However, the judgment has to be registered first with the local courts to be enforceable.

NetOne was formed in 1996 as the first cellular network provider in Zimbabwe, and is the country's second largest mobile operator with about three million subscribers.

The judgment comes at a time NetOne is facing a leadership crisis following resignations of three board members, including chairman Mr James Mutizwa, last month under unclear circumstances. Other board members are Ms Sibonile Dhliwayo (audit committee chair) and Mrs Keuemetsi Mupandawana (HR committee chair).

Chief executive Mr Lazarus Muchenje and acting chief finance officer Mr Tinashe Severa, were also suspended without pay and benefits over alleged incompetence.

Mr Muchenje has since approached the High Court seeking nullification of his suspension.

Already, corporate governance experts are calling for a special enquiry into the resignations of NetOne board members in terms of Section 15 of the Public Entities Corporate Governance Act, which states that where two or more members resign, whether simultaneously or within a period of one month, the line minister may conduct an investigation in order to ascertain the reasons for their resignations.

And any findings made by the line minister must be communicated, without delay, to the Office of the President and Cabinet. A special inquiry may also be conducted. Sources said the board, led by acting chairperson Ms Susan Mutangadura, has deliberately concealed the information from the Ministry of Information Communication Technology, Postal and Courier Services and other stakeholders.

Even after holding more than 10 ordinary and special board meetings in the past few weeks, none of the meeting ever deliberated on "this important and potentially explosive court case in Britain" .

"The culture of impunity continues at NetOne as the current board has not met at all to discuss this catastrophic ruling, and neither have they addressed this matter with their minister or ministry," said a source who requested not to be named for professional reasons.

"Instead the board is spending time on issues pertaining to the firing of the executives and embroiled in their own destructive boardroom battles and squabbles and don't seem concerned at all about the affairs at NetOne; potential losses (and) network availability, which has dropped to 50 percent in some areas and staff welfare."

In December 2016, NetOne signed an agreement with FTS for a new billing platform. The agreement was unprocedurally terminated in June 2017. Two months after signing the FTS agreement, the NetOne board had already passed a resolution to find an alternative billing platform. The reason cited in arriving at the resolution was that FTS wanted to be paid in foreign currency, which NetOne did not have.

The FTS billing system and agreement had been for US$6,7 million. NetOne went on to sign another agreement for US$12 million with ZTE in September 2017, which was double the value of the agreement with FTS that had been cancelled.

Repeated calls to Ms Mutangadura's mobile phone went unanswered on Friday.

NetOne must now find US$5 to settle the dispute once registered. The question that come to mind is, why should NetOne pay all this money for a billing system that was never delivered? "And why should NetOne and Zimbabwe suffer because the NetOne board does not want to do things according to the rules?

"Who will be held accountable for this loss?" another source asked.

Information at hand point out to boardroom squabbles at NetOne at the time the arbitration processes were in progress. The then management ignored correspondences from the arbitrators, it is alleged.

When Mr Muchenje came on board, it was too late for him to salvage the situation despite concerted efforts to engage attorneys in Zimbabwe and London to represent NetOne.

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