Little action from $5m loan

'I think we can probably kiss that money goodbye,' says MP

Uncertainty surrounds the fate of $5 million of public money given to a charitable trust for use in setting up a third mobile network.

The money was handed over in 2000, but Computerworld has found little evidence of progress creating the network or of government government oversight of the loan.

The office of Communications Minister David Cunliffe referred all questions about Econet's commercial role to the Minister of Maori Affairs, Parekura Horomia. Horomia's office initially rejected any involvement, instead suggesting management of the relationship with Econet lay with the Minister of Finance. In turn, Michael Cullen's office referred all questions to the Minister of Economic Development, Jim Anderton, whose office denied any involvement in the process at all.

Eventually, Computerworld received a short written statement from Horomia saying the Ministry had no direct relationship with Econet Wireless but instead had set up the Maori Spectrum Trust, Te Huarahi Tika, to “facilitate Maori participation in the knowledge economy”.

The Trust was given $5 million in 2000 for use partnering in a commercial enterprise. Through its commercial arm, Hautaki Ltd, it then purchased a 30% stake in African telco Econet Wireless' New Zealand operation for $4 million. However, Econet NZ has not launched its promised second national GSM network and has apparently done little with the money except pay for research into the state of New Zealand's cellphone market.

The current chair of the Maori Spectrum Trust, Mavis Mullins, declined to answer any questions about Econet Wireless or the Trust's expectations of ever seeing a return on its money. Instead she requested all questions be sent to the former chair of the Trust, Bill Osborne. Osborne resigned his post as chair of the Trust to take up the chairmanship of both Hautaki and Econet Wireless' New Zealand board. Osborne was not available to answer questions despite being contacted by Computerworld several times last week.

Despite all that, Horomia claims the Trust has been making progress. "The Trust's annual reports, which are available on the Trust's website, indicate it has been actively working towards fulfilling its objectives," he said in the statement.

However, the Trust's website carries a note saying it was last updated in October 2002. It contains only one annual report, for the financial year 2000-2001.

After repeated refusals to answer any questions about the activities of Econet Wireless, its relationship with the Trust, its majority ownership in Africa, its plans for a New Zealand network, the use of the money received from the Trust, its work done to date or indeed whether it would even build a network in New Zealand, Econet NZ managing director Tex Edwards told Computerworld he was “comfortable with our position” in reference to the company's financial state and future plans.

“It's true the changes in the shareholding structure of our parent company have put us behind schedule but we're very pleased with the changes themselves,” Edwards says. Econet Wireless New Zealand is majority owned by Zimbabwean company Econet Wireless Group which has itself recently merged with another African telco, Altech. The new combined company is listed on the Johannesburg Stock Exchange.

Edwards says his plans for a New Zealand network are progressing and insists a market exists for a third cellphone network.

“We are conducting a series of strategic reviews with regards to our spectrum, but we reiterate there is no competition in GSM [the networking standard used by Vodafone] in New Zealand.”

Econet has an option to purchase the management rights for spectrum to roll out either a second generation GSM network, similar to the one Vodafone has had in New Zealand since it arrived here, and also a third generation network. However Edwards does concede that building a GSM network in New Zealand now is perhaps not the best use of Econet's resources.

“GSM is a legacy system these days, that is correct,” he says.

Econet has made no decision on which 3G technology it would deploy but Edwards says it is leaning towards wideband CDMA (W-CDMA), similar to the network Vodafone is currently building. Vodafone has put a price tag of up to $400 million on its national network.

Asked why Econet's parent company would consider building a network in New Zealand when it is also rolling out services in Africa, with its much larger population base, Edwards claims “New Zealand has no competition”. Edwards says details of Econet's network plans, resource consent applications and supplier negotiations are all covered by non-disclosure agreements and refused to discuss them.

In December, Act MP Deborah Coddington tabled questions in Parliament about Econet. Coddington says she's very concerned about what she describes as the lack of accountability with regard to the loan given to Econet.

"I think we can probably kiss that money goodbye," she says.

Coddington says she has requested official documents relating to both Econet and the Trust.

"I've seen letters from [then Minister of Communications] Paul Swain's office to the Minister of Maori Affairs, and Swain is clearly concerned about the whole matter. He wanted monthly meetings with the Trust and Econet but there's no evidence that they actually happened."

Coddington says she will be asking more questions in Parliament about Econet and the ongoing assessment of the Trust and of the loan.

"The Government shouldn't be giving away money like that without demanding some accountability. It's the public's money."

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