TelOne reels under US$378m debts

HEADS could roll at the state-owned fixed line operator TelOne over the company’s US$378 million negative legacy loans, accusations of mismanagement and inflated cost structure amid indications that managing director Chipo Mtasa (pictured) could be forced out of the entity, it has been established.

By Bernard Mpofu

Chipo Mtasa

Chipo Mtasa

This year TelOne bucked the parastatal trend of delaying the publishing of financials in September when it released its half-year financials in line with a corporate governance code for state-owned enterprises. But the performance of the company, which lost significant market share to mobile phones has not yielded dividend for treasury.

According to documents seen by the Zimbabwe Independent and TelOne sources, failure to declare a dividend among a litany of concerns has piled pressure on Mtasa and the company’s finance director, Ellen Chivaviro, to deliver.

Sources said Mtasa has now opted not to renew her contract, which expires on December 31 this year. Government, sources said, is also strongly opposing the renewal of TelOne’s finance director’s contract.

Mutasa was appointed TelOne MD in 2013.

Mtasa, the sources said advised her line minister, ICT minister Supa Mandiwanzira that she did not want to renew her contract but rather wanted to negotiate a package with the board. Mandiwanzira, sources said, subsequently wrote to TelOne chairperson Charles Shamu asking him to consider Mtasa’s request.

Mandiwanzira expressed concern that the parastatal’s legacy debts were weighing down the company while also expressing disappointment that the parastatal’s board was failing in discharging its oversight role resulting in mismanagement.

Mismanagement at the company as highlighted in a survey conducted by PriceWaterhouseCoopers.

“The Ministry of ICT, Postal and Courier Services takes note of your reference to the findings of the TelOne Staff Engagement Survey conducted by PriceWaterhouseCoopers in 2013. Specifically we note the observation that there is a deep-seated culture of entitlement that is not performance-driven at TelOne … It becomes easy to understand why it is business as usual at TelOne when the ratio of operating expenditure to revenue sits at 103%,” Mandiwanzira wrote in a performance report for TelOne to Shamu.

“TelOne is simply operating without clear financial and operational direction, and the board is not in synch with the shareholders performance expectations. This posture is unacceptable and indicative of a leadership crisis, again, as reported in your reference to the findings of PriceWaterhouseCoopers.”

Government, sources said, also expressed its concerns over the timing and level of disclosure related to TelOne’s liabilities to the Communications and Allied Industries Pension Fund (CAIPF).

“On two occasions (April 10 and February 16) we received representations on the challenges of maintaining the defined benefit pension arrangements with CAIPF. Then, on November 29 the ministry received further formal advice from TelOne that the CAIPF has accumulated an actuarial deficit of US$81 million, of which estimates indicate TelOne’s portion of the deficit to be in the region of US$51 million,” the letter further reads. “In line with International Accounting Standard (IAS) 19 paragraph 148(ii) and (iii), this disclosure is neither mentioned in the 2015 TelOne integrated annual report, nor is any disclosure given in relation to the reason why sufficient information is not available to enable TelOne to account for the plan as a defined benefit plan. Further to this, TelOne has never disclosed to the Ministry of ICT, Postal and Courier Services the expected contributions to the plan for the next annual reporting period. These practices leave a lot to be desired and do not reflect well on the board and management at TelOne.”

Mandiwanzira could not be reached for comment. It is also understood that earlier on government had also engaged a consultancy firm, Sofrecom to renegotiate and review a US$98 million Huawei Fixed Broadband Project for TelOne.
Shamu said he could not comment on Mtasa’s contract.

“We are not at liberty to disclose any details on this as contractual issues are confidential between the employer and employee. You may however need to note that Mrs Chipo Mtasa will continue as TelOne managing director come January 2017,” Shamu said. “TelOne has for the past four years continued to transform to become a competitive player in the telecommunications space in Zimbabwe. The company has in many instances received public commendation from the shareholder who is the Government of Zimbabwe. Further to this, TelOne has also received a number of accolades from reputable independent bodies. The Ministry of ICT, Postal and Courier Services, the Ministry of Finance, the Auditor-General’s Office are among the representatives of the government who have publicly endorsed the work of TelOne. This therefore makes the claims that government is unhappy unfounded.”

According to the Chinese embassy, the TelOne communication project has entered the final phase of disbursement and the parties have signed the third phase of the agreement which will take off next year. When finished, this US$485 million project will cover 10 million Zimbabwean users.

TelOne, now sees data services eventually becoming the major contributor to the company’s revenue after it invested heavily into overlay services. Official figures show that the company’s revenues for the first six months of the year dropped to US$59 million from US$69,2 million on the back of increased data usage.

Sources said as a result of what Sofrecom described as “very poor” technical assessments on the part of TelOne, it was impossible for Sofrecom to evaluate the integrity of the bill of quantities that Huawei and TelOne had agreed on
“Ultimately, negotiations initiated and led by Sofrecom have resulted in a saving of approximately US$14 million, which is 14% of the total project cost. This performance indication casts very serious aspersions over the board and management’s grasp of the strategic imperatives of government, especially with regards to the timeous delivery of cost effective outcomes of strategic importance; of which this project is simply one amongst many expected deliverables,” the report further reads. “Ultimately, our concerns over the dearth of strategic leadership, inefficient strategic scoping and ineffective financial and operational performance management at TelOne have not been addressed.”

4 thoughts on “TelOne reels under US$378m debts”

  1. Tawanda Shumba says:

    Who is telling the truth, two days ago we read in the Newsday that she was doing well and had renewed her contract and was doing well.

  2. Pasi Tinochera says:

    It may not be true to say that she is doing well at Telone. That institution needs a bold, energetic, alert and lively turnaround expert if we are to see a real transformation to a profitable entity, that cant be done by the current executive. ICT Minister is right there in insinuating that mismanagement and absence of oversight has suffocated it.

  3. Ken Girtz says:

    Journalists journalists journalists !

    The report served to readers is too narrow and limited on a story that warrants broad and deep appreciation of developments in a strategic sector that has far reaching national impact and consequences.

    1. Government investments in the telecommunications cum communications entities it controls are spread so thinly and widely that has to be the first angle, tracing the historical pattern of parastatal malaise, lack of investment, bloated employment, non-performance, non-accountable political appointees etc etc. Defined Benefit (DB) Pensions are costing TelOne today the same way ZESA is laden with similar DB. Disclosure requirements cannot be imposed on management when line ministries have representatives on the Boards! The Chinese funded projects are mostly brokered by line ministries and the state owned entities often have to struggle to make business sense out of these deals. Why engage Sofrecom after the deal and not during the deal making or before ? Shifting or allocating blame is not a solution ! Face up, man up, to the realities Government faces at TelOne, NetOne, Telecel & Zarnet; at PowerTel, at Transmedia, at NRZ – all telecommunications cum communications entities and through NSSA investments in Telecel and Africom, and various others scattered all over Government and too small or specialised to mention.

    2. The report begs questions? Does TelOne have a 98m or 485m project? Did PWC conduct a survey on staff engagements prior to 2013 (and there are plenty of ineffective staff), or in 2013 by the Board or by management? Who engaged Sofrecom? And, given allegations Reward Kangai made about consultants engaged at NetOne allegedly to conduct a witchhunt, who is Sofrecom?

    3. If Ministry of Finance called time on high remuneration packages, when are they calling time on DB pensions? If Ministers hire and fire Boards, presumably the boards hire and fire management who in turn hire and fire staff; what instruments exist to make sure the hiring entity is held accountable for the performance of those it selects? Indeed, what measures exist for the public to hold the Minister and Ministry accountable for failings in appointments or in performance? Especially when interference is rife, particularly by Ministry and Boards in management issues.

    Evidently one can go on and on. The main point, however, must not be lost, that these press articles do not seem to be meant to inform and educate the public. It seems more an attempt to argue for one side against the other in an organisational political fight that has no relation to shareholder (citizen cum consumer) interest. It is trite to call time on this type of journalism. We deserve better.

  4. Chokwadi Nyika says:

    Readers might be interested to know that the Ministry of ICT had wanted to mandate Megawatt Energy, to audit the pricing of the TelOne contract of US$98million with Huawei Technologies, in much the same way, the Minister mandated the same company to audit NetOne’s project with Huawei. Megawatt Energy was to paid U$$4million for the consultancy work by NetOne. They only backed off TelOne, following the resistance by NetOne management to pay Megawatt Energy and TelOne followed proper procedures and engaged Sofrecom of France, Sofrecom quoted less than US$200 000 for the work that the Minister wanted Megawatt Energy to be paid US$4million into an off-shore Mauritius Bank account! The refusal to pay Megawatt Energy saw NetOne management being fired. Megawatt Energy is owned by Mr Li Xiaodong, a former vice-President of ZTE Corporation of China. ZTE is a rival to Huawei Technologies.This article is about setting the stage to supplant TelOne Board and management. How can they be blamed for the US$378million, which the authors of the article admit it is a legacy debt, which was incurred well before the time of the current Board and management.Both NetOne and TelOne have been financed by debt and not through shareholder equity, hence these legacy debts which could not be serviced since year 2002 due to the acute shortage of foreign currency in the country. So, should the shareholder blame the Boards and management? I say shareholder because the article was clearly authored by a high ranking representative of the shareholder.

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