TelOne chokes under ZWL$20.5 billion govt debt

TelOne is struggling to recover about ZWL$20.5bn in unpaid obligations by the government which has affected the viability of the State-owned fixed telecommunications network operator.

The government, which is the major shareholder of TelOne, accounts for 51% of the company's total debtors book which stood at ZWL$42.8bn as of May 31 2023.

TelOne board chairman Douglas Zimbango told Business Times on the sidelines of the recent annual general meeting that the parastatal was pushing the government to pay its debt instantly for the company to operate viably.

"Government owed TelOne ZWL$20.5bn as at May 31 2023, from ZWL$6.6bn as at December 31 2022," Zimbango said.

He added: "A significant portion of this debt, about ZWL$8bn was accrued prior to March 31 2023 when the debt was an equivalent ofUS$8.6m, however due to the depreciating ZWL$ against the US$, the balance has since declined to an equivalent of US$1.2m which translates to a loss of US$7.4m in real value terms."

He said TelOne was pushing for timeous settlement of bills in order to preserve the time value of money and allow the company to settle its obligations.

TelOne has legacy loans amounting to ZWL$268.4bn which is equivalent to US$394m.

Confronted with capitalisation needs of US$50m per annum, TelOne continues to search for an investment oasis on the back of legacy loans that have had a negative effect on the business's financial statements.

As a result, TelOne's ability to secure external funding, particularly capital expenditures for the deployment of a transmission network, has been negatively impacted.

Foreign currency generation from business operations was impacted by customer preferences to settle bills in local currency along with shortages of foreign currency on the auction market.

"This diminished the business' ability to fund capital expenditure towards network expansion and upgrades," Zimbango.

He said that the company was still working on initiatives to raise money for the company by selling off redundant network equipment, repurposing real estate, and enlisting the help of the private sector through Public Private Partnerships.

The business is also under threat due to network theft and vandalism, especially on the copper network, with at least US$510,000 being recorded in lost revenue and network elements for the period ended December 31 2022.

These losses stemmed from network vandalism incidents recorded during the year translating to a 20.7% increase compared to prior year.

A total of 51500 clients were affected by vandalism- induced downtime in 2022, amounting to a 30% increase from 39 965 clients that were affected in 2021.

As a result, it is now more crucial than ever to switch from the copper network to wireless and optical fibre alternatives because they not only offer significantly better user experiences but also are less vulnerable to vandalism.

TelOne is working to secure funding for the gradual replacement of the copper network.

Despite the challenges in the environment, which are threatening business viability, TelOne managed to post an inflation adjusted operating profit of ZWL$7.1bn up from ZWL$4.3bn achieved in the previous year.

However, the parastatal's operating expenses increased by 53% from ZWL$24.1bn in2021 to ZWL$37.8bn in 2022 in inflation adjusted terms and this was mainly driven by the depreciation of the local currency which had a pass through effect on inflation.

At the close of 2022, the company reported a revenue of ZWL$56.8bn, a 36%increase on the ZWL$41.8bn recorded prior year and this was driven by a tariff adjustment that came into effect in the third quarter of 2022.