Information Communication Technology minister Nelson Chamisa confirmed on Monday that Telkom was talking to TelOne, a state-owned telephone operator.
Chamisa did not say how much shareholding the South African group would get in TelOne, but Telkom was reportedly eyeing a 60% stake.
Last month, Telkom’s group executive for corporate development Mike Mlengana told South African news portal, ITWeb, that the company remained on the lookout for acquisition opportunities in Africa.
Zimbabwe has one of the lowest fixed and mobile telecommunications penetration rates on the continent.
Frost & Sullivan, a global business research and consulting firm, estimated that last year the country had 1,654 million mobile subscribers, less than 10% of the total population.
Sources said Telkom had already conducted a due diligence examination on the loss-making TelOne. Over the years the company has not been able to fund network improvements.
TelOne is in dire need of capital in order to upgrade aged network and expand its market.
However, raising capital had been a hurdle given the political and macro-economic environment and legislation limiting foreign ownership of Zimbabwean companies to 49%.
TelOne last month admitted restricting calls from landlines to mobile operators to reduce its debts. TelOne owed more than US$22 million to mobile operators in interconnection fees.
Interconnection fees are paid between operators to allow cross-network calls. It is not clear if TelOne has settled this debt.
According to TelOne managing director, Hampton Mhlanga, a cabinet decision to force the company to slash its tariffs earlier in the year did not help the telephone operator.
The directive, Mhlanga said, plunged the parastatal deeper into debt. Its obligations to other telecommunications operators and the Zimbabwe Revenue Authority (Zimra) had ballooned following the directive, Mhlanga told a parliamentary committee.
Under the interconnection arrangement between telecommunications operators, operators pay each other for traffic between their networks. For instance, if a TelOne customer calls a mobile operator, TelOne pays that operator US$0,07 per minute. Because Econet is the largest operator, with over two million subscribers compared to TelOne’s 300 000, most of the outbound traffic from TelOne is heading into Econet. This means its interconnection obligations to Econet and other operators, who are expanding their subscriber bases, were always rising.
Should, Telkom go ahead to invest in TelOne, the company would have to expunge debts and invest millions into capital expenditure.
The company said it was collecting about 15% of its bills from customers, yet Zimra demanded tax returns to be based on what the company billed, and not what it actually collected.
Already, the company has cut off defaulting customers in a move management hopes would limit liabilities. TelOne said it would use part of the funds to revamp some of its equipment which was either vandalised or now dilapidated.