Caveat Emptor

Caveat emptor, a legal doctrine that typically applies in the case of property law, stated that the buyer in a property sale could not recover from the seller for defects on the property that rendered the property unfit for ordinary purposes. It is worth heeding in the regional telecoms investment space as well.

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By  Tawanda Chihota Published  June 13, 2007

|~||~||~|The bristling pace of development of the regional telecoms industry was always likely to attract the attention of opportunists looking to cash in on the growing valuation of assets and investments in the sector. Caveat emptor, a legal doctrine that typically applies in the case of property law, stated that the buyer in a property sale could not recover from the seller for defects on the property that rendered the property unfit for ordinary purposes. The only exception was if the seller actively concealed latent defects, and while this doctrine has evolved over time, its underlying tenet of investor caution may well be heeded in the context of investment opportunities in the telecoms sector in the region. I was recently invited to attend the press conference of a Saudi-based company that was looking to raise the profile of its planned expansion into Africa. Senior representatives of the company, which is privately owned, explained that up to US$1 billion was set to be invested in opportunities in Africa, with a plan to have 4-6 million subscribers in place within five years. It was all pretty standard stuff given the growth potential African telecoms provides, and the amount of media coverage this opportunity has attracted. Though as many industry executives continue to tell me, the true value creation opportunity comes in the execution of such investments, rather than in paying the cash to win them. Safe to say this particular company’s track record to date does not inspire the greatest amount of confidence when it comes to matters of transparency and strong corporate governance, and it will be interesting to see how far its plans will take it in the future. Elsewhere, business continues to be to evolve at break-neck speed. Blink and you will miss something. My last comment introduced a Dubai Internet City-based company, Friendi Mobile, which is looking to develop and launch the region’s first mobile virtual network operator (MVNO) service. Well in the couple of weeks since that comment, Jordan’s Telecommunication Regulatory Commission has gone ahead and issued a draft regulatory decision paper on the provision of MVNO services in Jordan. It has set June 24 as the submission deadline for comments. Jordan’s TRC has a long history of championing liberalisation of the domestic telecoms sector, establishing itself as something of a first-mover when it comes to evolving and modifying regulatory guidelines. There exists amongst national regulators in the region a healthy competition to push boundaries and improve regulatory provisions, so it would not be surprising to see others adopt similar programmes in the not-too-distant future. Word is that Richard Branson, head of the Virgin Group, the company that raised the profile of MVNOs with the launch of its Virgin Mobile operation in the UK in 1999, has expressed interest in the regulatory developments occurring in Jordan, and would continue to monitor the situation. Watch out Friendi Mobile. I also spoke recently with Faisal Al Bannai, founder and CEO of mobile phone retailer and value added service provider Axiom Telecom, who reiterated his company’s interest in edging higher up the mobile value chain and ultimately evolving to become a service provider of sorts. “We do have an interest in the MVNO model and believe markets in the region are moving closer in readiness to launch such services,” Al Bannai said. “Our focus is to be an early MVNO in the region, but we also want to be a successful one also,” he added. Let competition in this latest frontier commence. ||**||

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