Owners of Internet and pay TV service provider Zuku have been thrust into a vicious boardroom war sparked by plans to sell off Wananchi Business Services — the unit that deals in corporate data services.
The company’s founder, Richard Bell, has moved to court seeking to stop his partners — Wananchi Nominees Limited, ISP Kenya Limited and East Coast Telecoms Limited — from instituting any civil or criminal proceedings against him or East Africa Capital Partners Management LP (a company he owns) for alleged mismanagement, asset stripping and tax fraud schemes.
ICT secretary Joe Mucheru and former CEO Njeri Rionge are the other well-known founders of Wananchi Group.
Mr Bell, through East Africa Capital Management, says the planned civil and criminal proceedings are part of a scheme by a section of shareholders who want him to buy their shares at inflated prices.
“As the performance of their shares in the ATMTF1 [Africa Technology & Telecommunications Fund 1] failed to meet their expectations, the defendants despite receiving valuation reports as stipulated in the shareholder and management agreements have engaged in a concerted scheme of extortion, threatening dire consequences unless they were bought out at their preferred price,” Mr Bell says in court filings.
Mr Bell says that the planned proceedings are aimed at frustrating the sale of Wananchi Business Services by dragging the firm’s name through the mud to discourage potential investors.
Complex ownership structure
The suit has also revealed the Internet and pay TV service provider’s intricate ownership structure that is made up of several layers of companies.
At the top of pile of companies that own Wananchi Group Holdings Limited is ATMTF1 with 69 per cent.
Mr Bell’s East Africa Capital Partners Management, Wananchi Nominees Limited, ISP Kenya Limited and East Coast Telecoms Limited own ATMTF1.
Mr Bell adds that the rival group of shareholders has already sent damaging letters to the taxman and the competition watchdog making “baseless” allegations.
“The letters, which have been sent on behalf of the defendants and copied to various authorities, including the Capital Markets Authority (CMA), and the Competition Authority of Kenya (CAK), have already and are causing substantial harm to the reputation of East Africa Capital Partners Management LP, ATMTF1 and Wananchi Group Holdings Limited,” he adds.
Wananchi Group Holdings Limited had in a 2015 board meeting resolved to sell off Wananchi Business Services, which owns licensed public data operator Simbanet, satellite teleport service provider iSAT and tier one carrier Wananchi Telecom.
The planned sale of Wananchi Business Services was intended to pump more capital into better performing units in the group, and to cater for projected cash shortfalls in future.
East Coast Telecommunications Limited, one of the defendants in the fresh suit, had in 2014 filed a suit against Mr Bell’s East Africa Capital Partners, Wananchi Group Holdings Limited and ATMT Holdings seeking a forensic audit of the Internet and pay TV’s books of accounts.
East Coast Telecommunications claimed that Mr Bell’s firm has been engaging in fraudulent product tendering practices, fraudulent transfer pricing of content and equipment and false accounting all aimed at benefiting a select group of shareholders.
The firm also faulted staff recruitment processes while claiming that the taxman risks losing out on due revenue from Wananchi Group. The KRA last year launched a bid to recover Sh3.4 billion from Wananchi Group, which has since been contested in court by the Internet and pay TV service provider.
Mr Bell now says the issues East Coast Telecommunications, Wananchi Nominees and ISP Kenya have raised are to be resolved through arbitration as per the shareholders agreement existing between them.
He adds that East Africa Capital Partners Management LP and ATMTF1 have issued a notice of arbitration, but that the rival shareholders’ camp has continued to threaten civil and criminal proceedings in Kenya.