daniel chigunwe
Business Writer
TelOne suffered massive exchange rate losses after currency depreciation witnessed this June, weighed on its debtors’ book which runs into billions of Zimbabwe dollars.
As at May 31, 2023, TelOne was owed $42,8 billion or US$16,6 million using the exchange rate of $2 577 prevailing on the day.
The exchange rate has since moved to $6,299, meaning the May 31 debt, if not paid, is now worth just US$6,7 million.
Grim as this seems, a statement issued by the company shows the situation is even worse.
A significant portion of this debt, about $8 billion was accrued prior to 31 March 2023 when the debt was an equivalent of US$8.6 million, however, due to the depreciating Zimbabwe dollar against the US dollar, the balance has since declined to an equivalent of US$1.2 million which translates to a loss of US$7.4 million in real value terms, the company said in a statement released by head of corporate Communications, Melody Harry.
The Government is the biggest culprit as it accounts for 51 percent of the total debtors’ book. It owed TelOne $20,5 billion, equivalent to US$8 million as at May 31, 2023, but this debt has since tumbled to just US$3,2 million in real terms.
The company said it is pushing for timeous settlement of bills “in order to preserve the time value of money and allow company to settle its obligations”.
The operating environment has also not been kind to the fixed network service provider, which, despite massive currency depreciation and rampant currency depreciation, has not had tariff reviews as often as required.
“The industry and TelOne, in particular, is affected by the delay in approval of a tariff that is index linked to the United States Dollar (US$),” the company said.
“The regulator approved a 50 percent increase in tariffs in February and April 2023.
As of the date of the last tariff approval, the exchange rate was US$1: $928 and has since deteriorated by 582 percent to US$1: $6,326.
“Prices of all utilities such as electricity, fuel including taxes have been reviewed several times since the last review to the extent that it is estimated that a tariff review of at least 500 percent is required to cover the increased operating overheads,” TelOne said.
This is at a time TelOne has legacy loans amounting to $268.4 billion (US$394 million) and capitalisation needs of US$50 million per annum. Harry said the debt overhang has adversely affected TelOne’s ability to attract external funding, particularly capital expenditure for transmission network deployment.
However, for the period ending December 31, 2022; the business had funded capital expenditure of US$9 million using internally generated resources.
Capital expenditure towards network expansion and upgrades could have been more had foreign currency generation from business operations had not been impacted by customer preferences to settle bills in local currency along with shortages of foreign currency on the auction market.
To to unlock funding for the business, TelOne is looking at unlocking value through its property portfolio.
It is also disposing of redundant network equipment as well as engaging private players through Public Private Partnerships to fund network equipment deployment.
Meanwhile, TelOne said aggregate demand on the company’s products remained high despite the operating environment challenges.
“Home Broadband recharges increased by 7 percent for the period under review in comparison to similar period in prior year while bandwidth capacity grew by 12 percent in the first half of the year.”
While this resulted in revenue growth, it did not translate to margin growth as tariffs remained sticky on the downside.
At the close of 2022, the company recorded an Inflation-Adjusted Revenue of $56.8 billion, a 36 percent increase on the $41.8 billion recorded prior year.
This was driven by a tariff adjustment that came into effect in the third quarter of 2022, according to the company.
“The delayed tariff adjustment, however, affected EBIDTA, which plummeted from 26 percent, the margin slumped to 20 percent at the close of 2022. The company, however, still posted an increase in profit ‘despite the challenges in the environment, which are threatening business viability’.
“TelOne managed to post an inflation-adjusted operating profit of $7.1 billion up from $4.3 billion achieved in the previous year,” reads part of the statement.
Bongani Ndlovu