Amendments to the Zambian Electronic and Postal Communications Act



The Electronic and Postal Communications Act, Cap 306 (Act No. 3 of 2010) (EPOCA) came into force in June 2010. EPOCA repealed the Broadcasting Services Act, 1993 and the Tanzania Communications Act, 1993 with the aim of putting in place a comprehensive regulatory framework for electronic and postal communication that is in line with the current developments in the industry.

EPOCA in particular highlighted the issue of local shareholding, amongst other things. In terms of section 26 of EPOCA (before June 2016), a minimum of 35 per cent of the applicant’s shares was to be held by a local shareholder in the case of electronic communication or postal licences, and a minimum of 51 per cent of the shares in the case of a contents service licence.

However, the shareholding structure provided for in EPOCA was amended in 2016 by the Finance Act, 2016 (2016 Amendments). The minimum local shareholding requirement of 35 per cent in the case of electronic communication or postal licences was abolished by the 2016 Amendments and the requirement for local shareholding to holders of network facilities, network services and application services licences was introduced.

According to the 2016 Amendments, the network facilities, network services and application services licensees (including telecommunication companies) were required to list 25 per cent of their shares on the Dar es Salaam Stock Exchange (Stock Exchange). However, for a content service licensee, the minimum listing requirement remained 51 per cent of the shares. The 2016 Amendments required all network facilities, network services and application services licence holders that were licensed before 1 July 2016 to offer their shares to the public and subsequently list shares on the Stock Exchange within six months from 1 July 2016. Network facilities, network services and application services licensees who were licensed after 1 July 2016 had two years from the date the licence was granted to list their  shares on the Stock Exchange. We note that the 2016 Amendments were subject to the Capital Markets and Securities Act, Cap. 79.

The reason for the 2016 Amendments, as explained by the Tanzanian government (Government) was to “empower local Tanzanians and forging ways to make telecom companies in the country more accountable and transparent”. However, this move was criticised by the telecommunication companies as well as other stakeholders for various reasons. The telecommunication companies were critical of the Government’s decision to exclude foreigners from participating in the listing exercise, and expressed concern about the time period within which listing was to be completed (due to the listing process being complex and time consuming). In practice, most of the telecommunication companies failed to meet the listing deadline of 30 December 2016 (Listing Deadline).

The failure to meet the Listing Deadline was a material breach of the legislation governing electronic and postal communication and could have resulted in the suspension or cancellation of licences held by the telecommunication companies. By December 2016, only one telecommunication company (Vodacom Tanzania Limited) had taken steps to comply with the relevant listing requirements. We understand that the other telecommunication companies were not penalised for failing to comply with the relevant listing requirements, despite efforts by the Tanzania Communications Regulatory Authority to enforce compliance with the relevant listing requirements.

In some instances, certain telecommunication companies failed to meet the Listing Deadline, as the company itself had not started trading (and the company had not yet been capitalised). Accordingly, Tanzanian investors were reluctant to invest in companies that had no track record.

The failure to list by the majority of the telecommunication companies triggered a further amendment to EPOCA, by way of the Finance Act, 2017 (2017 Amendments). The 2017 Amendments exempted application service licensees from having to comply with the relevant listing requirements. Accordingly, only network facilities and network services licensees were required to list 25 per cent of their shares on the Stock Exchange.

The 2017 Amendments removed the local shareholding requirement. Accordingly, foreigners could also acquire shares in the 25 per cent listed share capital of a telecommunication company. The Government stated that this amendment opened “the mandate of companies listing 25 percent of their shares to allow Tanzanians, Tanzanian companies, Tanzanians in the diaspora, joint ventures between Tanzanians and foreigners, East Africans or companies owned by East Africans, or citizens from other countries”.

The 2017 Amendments stipulated that if “a licensee of network facilities or network services does not attain the prescribed threshold of 25 percent of its issued and paid up share capital after conducting an initial public offer, the Capital Markets and Securities Authority shall upon consultation with the Minister responsible for Capital Markets and after taking into account conditions prevailing in the market, issue directives on how the licensee may obtain the 25 percent”.

Despite the above-mentioned amendments, to date only Vodacom Tanzania Limited has complied with the relevant listing requirements. We anticipate that the rest of the telecommunication companies (and other licensees) will comply with the relevant listing requirements in the near future as the amended listing requirements are now less rigid and provide ample time for licensees to comply with the relevant listing requirements.

Special thanks to Lucy Sondo and Irene Mwanyika of Abenry & Company in Zambia for their contribution.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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