Telecel denies rumours of imminent collapse, could convert USD90m debt to equity

20 Jan 2020

State-backed Zimbabwean mobile operator Telecel has denied that it is on the brink of closure, saying it is seeking a tariff review to enable it to increase prices and raise the funds needed to meet its financial obligations. Local press reports last week suggested that the company’s servers had been down since last month and that network availability had been cut by 65%. While a Telecel statement acknowledged that it is facing challenges and has been under-performing, it went on to say: ‘The company is not at the brink of collapse and continues to offer quality service to its customers.’

The statement continued: ‘Like all other local organisations, Telecel Zimbabwe’s operations have been affected by a host of factors, both macro and micro-economic, but attributed mainly to limited funding for the company over a long period of time, in the face of challenging economic conditions in Zimbabwe. Specifically, rapid depreciation of the local currency and the levels of tariffs increases approved, which continue to lag behind inflation, have affected the ability to meet the foreign currency denominated obligations, especially spares for equipment and service level agreements and support. This limited vendor support has resulted in some network disruptions during the festive season, which have since been rectified. In order to mitigate these challenges, the company has been on a very aggressive import substitution and local skills transfer. The company’s main switching centres are in the industrial area and have been subjected to prolonged power outages which have resulted in the company’s technology operating costs ballooning due to the use of alternative power, particularly diesel, and [this] has in turn affected base station availability in other parts of the country.’

The statement concluded by saying that discussions have started to bring additional funding to Telecel. ‘Plans are underway to address the issue of recapitalisation and, in this regard, a five-year strategic plan has already been formulated and adopted. The finalisation of all outstanding financial statements is on course and this will open avenues for new funding from financial institutions.’ A report from The Sunday Mail says that the government, as 60% shareholder, is looking to convert USD90 million of debt to equity. A source told the paper: ‘That is the most immediate viable option of rescuing the company.’

Zimbabwe, Telecel Zimbabwe