STATE-OWNED telecoms company TelOne says it requires US$50 million each year to recapitalise and upgrade its infrastructure amid revelations that the government accounts for 51% of its debtors’ book.
TelOne (Private) Limited shareholders met on Thursday for the 9th annual general meeting (AGM) against the backdrop of acute operational challenges owing to exchange rate volatility, the consequent impact on the debtors’ book as well as the impact of delayed tariff reviews.
The telecoms industry and TelOne in particular is affected by the delay in approval of a tariff that is index-linked to the United States dollar.
“Government accounts for 51% of the total debtors’ book of ZW$42.8 billion as at 31 May 2023,” the company says.
“Government owed TelOne ZW$20.5 billion as at 31 May 2023, from ZW$6.6 billion as at 31 December 2022.
A significant portion of this debt, about ZW$8 billion, was accrued prior to 31 March 2023 when the debt was an equivalent of US$8.6 million. However, due to the depreciating Zimdollar against the US dollar, the balance has since declined to an equivalent of
US$1.2 million which translates to a loss of US$7.4 million in real value terms.”
This year the Postal and Telecommunications Regulatory Authority of Zimbabwe approved a 50% increase in tariffs in February and April 2023.
“As of the date of the last tariff approval, the exchange rate was US$1: ZW$928 and has since deteriorated by 582% to US$1: ZW$6 326,” the company says.
“Prices of all utilities such as electricity, fuel including taxes have been reviewed several times since the last review to the extent that it is estimated that a tariff review of at least 500% is required to cover the increased operating overheads.”
The company says aggregate demand on products remained high despite the challenges associated with the operating environment.
Home broadband recharges increased by 7% for the period under review in comparison to the corresponding period in prior year while bandwidth capacity grew by 12% in the first half of the year.
“TelOne is pushing for timeous settlement of bills in order to preserve the time value of money and allow company to settle its obligations,” the company says.
“TelOne has legacy loans amounting to ZW$268.4 billion (US$394 million).
“Confronted with capitalisation needs of US$50 million 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. Resultantly, this situation has adversely affected TelOne’s ability to attract external funding, particularly capital expenditure for transmission network deployment.
“For the period ending December 31, 2022; the business had funded capital expenditure of US$9 million using internally generated resources. However, 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.”