Zim telecoms firms may no longer be going concerns - AG

2017-06-24 10:33 - Memory Mataranyika
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Harare – Zimbabwe’s auditor general has cast doubt on the ability of the country’s telecommunications companies to continue as growing concerns, flagging bloated net liability positions and potential threats to service delivery among other governance issues.

This comes at a time when the government has taken control of another telecom company, Telecel Zimbabwe, after recently buying out VimpelCom’s 60% stake in the company.

State-owned ICT companies flagged by auditor general Mildred Chiri in her report released this week include mobile firm NetOne, fixed phone company TelOne and internet services provider Powertel. Mildred Chiri, the auditor general, said TelOne is “technically” insolvent.

TelOne had a net liability position of $112m by the end of 2016 compared to $98m in the prior year. The auditor general’s report also said fixed term borrowings for the parastatal “approached maturity without realistic prospects” of renewal or repayment.

“These conditions indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern,” said Chiri in her report.

Further worsening the situation for TelOne is a legacy debt amounting to $364m; overdue charges over this amount surged to $93m by the end of 2016.

Management at TelOne, led by managing director Chipo Mtasa, responded to this, saying the “loans are weighing down performance through accumulation of interest”. The company is now pursuing an arrangement which will see the government warehouse the loans over a five-year period.

TelOne management has blamed “the harsh economic environment that has resulted in liquidity challenges”, while it has also witnessed revenue decline due to consumer preference for mobile and over the top services over traditional fixed phone communication.

Chiri has also raised the red flag over Powertel, another state-owned telecom company offering internet services. Powertel incurred a net loss of nearly $500 000 in the year to end-2015, while its current liabilities exceed its current assets by $1.6m.

The auditor general said these conditions “indicate the existence of material uncertainty” that cast significant doubt on the going concern status of Powertel. TelOne said it has engaged “certain vendors to obtain medium-term vendor assisted financing totalling $7.7m”.

Management also said it has put in place strategies to grow the business through voice over internet protocol, growing its mobile data through the CDMA platform and development of new product offerings.

The continued services of NetOne, a mobile network operator owned by the government of Zimbabwe, “may be compromised” because of the telco’s losses. In the year to end-2015, NetOne recorded a loss of $3.4m.

Management at NetOne, which agrees with Chiri’s findings, has responded to this, saying: “Revenue enhancement measures have been undertaken by reviewing current products and re-organising the sales team to deliver more revenue. Costs are being interrogated and reduced at every level.”

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