TelOne suffers liquidity crunch

State-owned telecommunications giant TelOne Private Limited is facing a serious liquidity crisis amid revelations that the government owes the company US$19.2 million for voice and data services rendered over several years.

The debt burden comes at a time when TelOne is already reeling under a massive US$389 million in legacy debt inherited from the unbundling of the former Postal and Telecommunications Corporation (PTC) more than two decades ago. The unbundling process saw the creation of TelOne, NetOne Cellular, and Zimbabwe Posts (ZimPost), with TelOne assuming most of the historic debt.

Speaking to journalists following the company's Annual General Meeting this week, TelOne chief executive officer Lawrence Nkala said the government's unpaid bills have become a major impediment to operations and future investment.

"As of today, the government of Zimbabwe owes TelOne ZiG517.2 million, which is equivalent to US$19.2 million," Nkala said. "We continue to engage the government through various channels to settle its dues, including the Ministry of Finance and other line ministries."

He said the unpaid debt had severely affected TelOne's cash flow and its ability to meet statutory obligations, including those owed to the Zimbabwe Revenue Authority (ZIMRA).

"This has caused serious liquidity constraints within the business. We are hamstrung in our operations because we do not have adequate capital or working capital to sustain our operations and pay staff," Nkala added.

He said some government departments had cited Treasury challenges and budgetary constraints as the reason for non-payment, noting that despite being allocated budgets, funds were often not disbursed to pay TelOne.

The weight of the legacy debt, worth ZiG10.05 billion (US$389 million), has also left TelOne operating in a net liability position of ZiG32.2 million as of December 31, 2024. This has hindered the company's ability to secure fresh capital for much-needed infrastructure upgrades and digital transformation initiatives.

Despite the financial setbacks, TelOne has managed to deliver several infrastructure milestones using internally generated funds. These include the commissioning of 29 new Long Term Evolution (LTE) base stations and connecting 12,000 households to its Fibre-to-the-Home (FTTH) broadband service.

The company posted inflation-adjusted revenue of ZiG2 billion in 2024, a 20% increase from the previous year. Growth was largely driven by its wholesale business, which surged 102% to 81.8 gigabytes in sales, while the enterprise segment grew 26% and the cloud services division recorded a 23% rise in demand.

Home broadband subscriptions also grew by 5% to 147,876 users, each spending an average of US$12 per month.

Nkala said TelOne is prioritising network investment through LTE and FTTH rollouts to maintain its revenue growth momentum.

Meanwhile, Treasury is reportedly working on payment strategies to settle TelOne's dues and address the company's legacy debt burden. However, until tangible support is provided, the viability of one of Zimbabwe's key telecommunications players remains under threat.