State owned fixed telecommunications giant TelOne says unpaid Government debts amounting to $93 million, 62 percent of total debt, are largely the reason it has struggled to meet obligations to critical local creditors who are owed nearly $100 million.
And in 2018, TelOne said it was penalised $8,9 million by the Zimbabwe Revenue Authority (ZIMRA) for late settlement of its tax obligations due to liquidity challenges brought by late settlement of accounts by various customers, mainly the Government.
Since its debtors are taking too long to pay up, TelOne’s trade debtors’ book only decreased by a mere 7 percent from $162 million in 2017 to $151 million 12 months later.
The amount of outstanding accounts receivable is made up of balances due from Government ministries, parastatals, corporates and household clients.
TelOne said its debts to service providers and other creditors increased by 7 percent from $152 million to $162 million while its external debt had also ballooned to $32 million due to challenges it has faced getting requisite foreign currency.
“Settlement of critical local creditors of $98 million has been affected by late settlement of what is owed to us. Local creditors, namely Postal and Telecommunications Regulatory Authority of Zimbabwe, Zimbabwe Revenue Authority, local interconnection partners and the Pension Fund are collectively owed $93 million,” managing director Chipo Mtasa told TelOne’s annual meeting this week.
“Delayed settlement by debtors continues to have a negative impact on the company’s ability to settle critical statutory and contractual obligations,” she added.
Ms Mtasa said while mindful of economic challenges being experienced by the country, TelOne continued to implore all clients to settle their debts to allow ease of business.
“To this end we have put in place different strategies for debt collection including black listing or litigation where necessary. This has resulted in a 26 percent increase in collections of at least $64 million between January and May this year,” she said.
The business is also being weighed down by legacy loans inherited from Post and Telecommunications Corporation (PTC) at its unbundling in 2000. Finance charges on legacy loans of $12,4 million were incurred in 2018, eroding the company’s profitability.
TelOne owes a cumulative US$383 million to a number of external lenders including Eksportfinas of Norway (US$13,8 million); Eximbank of Japan (Sumitomo II) (US$9,5 million); BNP of France (US$36,2 million); Tunisia-based African Development Bank (US$89,9 million) and KFW 11A of Germany (US$12,6 million).
However, despite the many hurdles including inflation induced increases in operating costs, the company’s performance at EBITDA (earnings before interest, tax and depreciation) level improved by 21 percent, from $19 million in 2017 to $23 million in 2018.
“We are pleased to announce a $10million turn-around which saw TelOne achieving break-even in 2018 from a loss position of $10,2million in 2017 without legacy loan expenses and ZIMRA (delayed tax remittance) penalties and interest,” Ms Mtasa said.
This growth was on the back of a 5 percent increase in revenue for the year ended December 31, 2018, owing to a 37 percent upsurge in broadband revenue. Total revenue grew to $125 million in 2018 compared to $119 million achieved in same period in prior year.
Broadband revenue grew to reach $61,1 million from $45 million in 2017. Since the beginning of the implementation of the national broadband project in 2016, TelOne said it had witnessed an 85 percent cumulative growth in data revenue resulting for the first time, in the off-setting of voice revenue loss by gain in data revenue.
Between January and May 2019, a revenue increase of 62 percent was recorded compared to same period last year, representing marked improvement from $48,6 million in 2017 to $79 million.
During the same period and the first time in three years, Mtasa said earnings before interest and tax of $1 million from negative $4,2 million was achieved, marking a $125 percent increase.
Having completed five years of the transformational strategy, largely anchored on technology modernisation and expansion, TelOne’s strategic thrust for the period 2019-2023 has shifted to digital innovation services and products.