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Cablegate: The King's Economy - Cell Phone Business Bends to Royal

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TAGS: ECPS EINV PGOV WZ SF
SUBJECT: THE KING'S ECONOMY - CELL PHONE BUSINESS BENDS TO ROYAL
POLITICS

1. (SBU) SUMMARY: Royal politics and King Mswati's business
interests appear to have caused the ouster of Mobile Telephone
Network (MTN) CEO Tebogo Mogapi and halted parastatal Swaziland Post
and Telecommunications Corporation (SPTC) from selling the MTN
shares it owns to raise money for a Next Generation Networks (NGN)
cell phone project. Industry and press observers privately
indicated that the king, who already owns many MTN shares, had
wanted to purchase the MTN shares himself at a cheaper price than
the buyer, MTN, was offering SPTC. Government officials later
prevented the sale, and recently did not renew the work permit for
CEO Mogapi, a South African citizen, apparently in retaliation for
his role in the transaction, as well as the CEO's reported decision
to oppose government efforts to use the MTN network for electronic
surveillance on political dissidents. END SUMMARY.

2. (SBU) Royal politics and King Mswati's business interests appear
to have caused the ouster of Mobile Telephone Network (MTN) CEO
Tebogo Mogapi, a South African citizen, and halted parastatal
Swaziland Post and Telecommunications Corporation (SPTC) from
selling MTN shares it owns in order to raise money for a Next
Generation Networks (NGN) cell phone project.

3. (SBU) The NGN is intended to support both fixed and mobile
connectivity, and enable SPTC to deliver communication services
regardless of geographic location. SPTC planned to switch on the
fixed mobile phone system on September 6, 2009. To provide capital
for the rollout, SPTC announced it would sell the 10 percent of MTN
shares it held. In July, the GKOS stopped the sale, claiming that
SPTC did not keep government informed of its operational plans.
Nevertheless, Prime Minister Barnabas Dlamini agreed that his
government was aware of SPTC's 2007 strategic plan, which included
information on the project.

4. (SBU) In 2007 the Swazi cabinet's Subcommittee on Public
Enterprises (SCOPE) approved the implementation plan, including the
sale of shares. SPTC has already spent approximately USD 62
million; sent people abroad for training; and ordered starter packs,
SIM cards, and other cellular telephone-related equipment.
According to a SPTC pricing officer, the company currently plans on
financing the project through bank loans.

5. (SBU) Industry and press observers privately indicated to us
that the king wanted to purchase the MTN shares himself at a cheaper
price than the buyer, the Roodeport, Gauteng (South African)-based
MTN company, was offering SPTC. The South African firm reportedly
offered twice what the next highest bidder did. The king had
previously been able to buy strongly performing MTN shares at a low
price, and he reportedly was annoyed he was not given that
opportunity again. The Prime Minister, too, is said to have
benefitted similarly from MTN's initial public offering.

6. (SBU) Embassy contacts and press reports suggest that GKOS did
not renew the MTN Swaziland CEO's work permit as retaliation against
the CEO for his role in the proposed share selling transaction to
the highest bidder. Other observers report that Mogapi also opposed
government efforts to use the MTN network for electronic
surveillance on political dissidents. Publicly, government
officials have loosely tied the decision not to renew Mogapi's work
permit to "localization" efforts to support greater Swazi inclusion
at high-levels in businesses.

7. (SBU) COMMENT: The government's halt of parastatal SPTC's sale
of MTN shares demonstrates the impact the king's and other
influential individuals' private business interests can have on
business transactions in Swaziland. Government officials would
likely prefer a more malleable Swazi CEO at MTN who would cooperate
more fully with royal and government wishes. END COMMENT.
IRVING

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