Wrap Text
TTO - Trustco - Voluntary Announcement Relating to Trustco Mobile`s Transaction
With Econet Wireless And First Mutual Life
TRUSTCO GROUP HOLDINGS LIMITED
Incorporated in the Republic of Namibia
(Registration number 2003/058)
NSX share code: TUC
JSE share code: TTO
ISIN Number: NA000A0RF067
("the Company" or "the Group" or "Trustco")
Voluntary Announcement Relating to Trustco Mobile`s Transaction With Econet
Wireless And First Mutual Life
Trustco announces that it has instructed its lawyers in Zimbabwe to apply for an
interdict against Econet Wireless (Private) Limited ("Econet Wireless"). The
interdict seeks to enforce Econet Wireless` compliance with its contractual
obligations, as entered into in its tripartite agreement ("the agreement") with
Trustco Mobile (Pty) Limited ("Trustco Mobile") and First Mutual Life Assurance
Company (Pty) Limited ("First Mutual Life") ("the parties") dated 17 August
2010, and to prohibit Econet Wireless from infringing in any way on Trustco
Mobile`s Intellectual Property Rights which are protected under Zimbabwean and
International intellectual property laws. The court documents will be in the
public domain and will clearly present the facts.
Background
The introduction of Ecolife into the Zimbabwean life insurance industry has had
a phenomenal impact on the accessibility of life insurance to the general
public, and on the lives of the 1.85 million (as at 31 May 2011) Econet Wireless
subscribers.
The uptake of life insurance through the Econet Wireless platform exceeded all
expectations from the first month of inception in Zimbabwe. Consequently, Econet
Wireless and First Mutual Life Assurance Company (Pty) Limited ("First Mutual
Life") reacted to the resounding success of Ecolife by seeking an equity stake
in Trustco Mobile during December 2010. The offer to acquire a stake was,
however, declined by Trustco, the holding Company of Trustco Mobile.
Econet Wireless has during the last few weeks increased its holdings in Africa
First ReNaissance Corporation Limited ("Afre Corporation"), the holding company
of First Mutual Life, and now controls the contracted insurance underwriter.
Since the inception of Ecolife seven months ago, policyholders in First Mutual
Life increased from less than one hundred thousand to close to two million
policy holders.
The specific allegations being lobbied against Trustco Mobile are as follows:
1. Trustco Mobile wanted more money
Prior to the launch of Ecolife and subsequent to the signing of the initial
agreement on 17 August 2010, the parties to the agreement sought guidance from
the Commissioner of Insurance and Pension ("the Commissioner") to approve the
roll-out of Ecolife in Zimbabwe. Initially a Royalty Fee of US$1.00 ("Royalty
Fee"), which included the insurance premium, was negotiated and contracted for
by the parties. The Commissioner correctly advised that the scope of the product
should be broadened to include subscribers who were HIV positive and/or who had
pre-existing medical conditions. The parties agreed to the expansion of the
scope of the insurance, recognising that this would result in an increase in
insurance premium payable to First Mutual Life. The resultant increase was
US$0.22c per subscriber per month. Trustco Mobile agreed to share 50% of the
premium increase with Econet Wireless and First Mutual Life. Consequently, the
Royalty Fee, which included the Underwriting Fee, increased from US$1.00 to
US$1.11. An amendment to the agreement to effect the amendment to the Royalty
Fee was signed by the parties on 24 January, 2011. Subsequent to the increase,
none of the parties challenged the contract on the basis of a US$1.11 Royalty
Fee.
2. Unilateral Termination of Contract
Following the continuous delay by Econet Wireless of payment of the Royalty Fees
to Trustco Mobile, and, more importantly, the Insurance premium to First Mutual
Life, Trustco Mobile served Econet Wireless with a Notice of Default, pursuant
to the terms of the agreement. Upon receipt of the Notice of Default, Econet
Wireless unilaterally and immediately terminated the contract, severed Trustco
Mobile and First Mutual Life`s access to the Trustco Mobile system, and denied
that payment was outstanding to Trustco Mobile.
On 1 June 2011 Econet Wireless conceded that payment was due to First Mutual
Life. Econet Wireless further indicated that while payment was indeed
outstanding it was nevertheless "available". First Mutual Life is by law not
required to honour any cover if premiums are not paid. First Mutual Life could
not confirm that it will honour claims when submitted.
As of 17 June 2011, Trustco Mobile has not been placed on notice for any breach
of contract as required by the contract.
3. Disclosure of Confidential Information
The allegation that Trustco Mobile disclosed confidential information to the
public by way of the JSE Limited ("JSE") is spurious. The information disclosed
to the JSE and to shareholders via the Securities Exchange News Service of the
JSE ("SENS") is in strict compliance with the regulations of the JSE. Similar
information was disclosed by Econet Wireless to its shareholders and its
analysts as is required by the disclosure regulations as both entities are
Public Listed Companies.
4. Misleading the Public
It is further alleged that the Ecolife Wireless subscriber number of 1.6 million
that was disclosed by Trustco Mobile was incorrect and intentionally misleading.
However, this number was publically quoted by Econet Wireless in the
international media. As at 31 May, 1 856 938 subscribers subscribed to the
Ecolife package.
5. Subscribers Inundated with Unsolicited Messages
The number of messages sent to subscribers was strictly in accordance with the
agreement, no more and no less.
6. Trustco Pleas with Econet
Trustco Mobile admits that it did plea with Econet Wireless, however, the plea
was for the fulfilment of Econet Wireless` payment obligations under the
agreement in order to continue providing free life insurance to qualified
Ecolife subscribers.
Access to life insurance remains extremely limited in Africa where less than 5%
of the continent`s population have access. Access to free life insurance is
extremely limited which is why Trustco Mobile remains committed to ensuring that
Africa`s 95% uninsured are not denied this indispensable service.
Requests from other role players in Zimbabwe for the Trustco Mobile proprietary
product have been declined pending the outcome of the current matter with
Econet.
About Trustco Mobile
Trustco Mobile, a subsidiary of Namibia-based Trustco and the first company to
list on the Africa Board of the JSE, provides free life cover for mobile phone
operators. Trustco focuses on microfinance for education and microinsurance in
Africa.
By order of the Board
J Bazuin
Company Secretary
Windhoek,17 June 2011
NSX Sponsor
IJG Securities (Pty) Ltd
JSE Sponsor
QuestCo Sponsors (Pty) Ltd
Date: 17/06/2011 14:19:01 Supplied by www.sharenet.co.za
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