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
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.”