Government could soon assume State-owned telecommunications firm TelOne’s legacy debts amounting to US$330 million amid indications various cabinet committees have okayed the plan, businessdigest has established.
The legacy loans amounting to US$330 million were inherited after the unbundling of the then Postal and Telecommunications Corporation (PTC). PTC was unbundled into TelOne, NetOne and Zimpost.
In a statement accompanying the financial results for the half-year ended June 30, TelOne said the removal of the debt from the balance sheet would allow the company to access loans at reasonable rates. Sources said government was warming up to the idea of assuming TelOne’s debt.
“Government is warming up to the idea. It has gone past various stages of cabinet committees. But Finance minister Patrick Chinamasa will have to make the final call,” a cabinet minister said.
TelOne wants to raise funds to turn the company into a competitive player in the sector. It has a US$98 million modernisation project but is yet to put in a final order with leading Chinese telecommunications equipment manufacturer, Huawei. Management said although price benchmarking was on an annual basis, the project has already begun such as the fibre optic roll out and the ADSL.
TelOne CEO Chipo Mtasa told journalists in the capital last month that government, the company’s shareholder, was talking to financiers for the project. TelOne’s finance cost stood out US$7,2 million in the interim to June 30. In the full year to December, the company paid US$19 million in finance charges.
TelOne has non-current liabilities of US$100 million. Of this figure, US$53 million is interest-bearing. In the half-year to June, TelOne’s current liabilities stood at US$475 million. Of this figure, US$330 million was interest-bearing. Total assets stood at US$412 million as at June. The telecommunications firm cut staff salaries by 15% in a bid to align its business’ operating model to productivity and lower operating costs.
Management said salary cuts were part of a broader strategy to lower operating costs by 20% and align staff costs to 32% of revenues. She said salary cuts began in August.
TelOne’s peers in the telecommunications sector also pursued the same route. Econet Wireless, Zimbabwe’s largest mobile network operator, also cut staff salaries by 35% across the board starting in July.
The cuts were effected at Econet’s subsidiaries — Steward Bank, Mutare Bottling and Liquid Telecom.
TelOne has redefined itself into a modern ICT company, which is offering converged telecommunication services and products under three main brands — Broadband, Satellite and Voice.
The company posted an operating profit of US$1,6 million in the six months to June 30 despite a fall in revenue.
Revenue was down 9% to US$69 million from US$76 million in the same period last year. Costs of sales were US$37 million from US$42 million. Administrative expenses were down to US$32 million from US$33 million last year. The Reserve Bank of Zimbabwe (RBZ) Debt Assumption Act, signed into law on July 27, paved the way for the government to take liability of an estimated US$1,35 billion debts incurred by the RBZ before December 31 2008.
A bill for the assumption of the debt would need to be tabled in parliament.