MUTAPA Investment Fund (MIF) — the sovereign wealth fund that took over a sprawling network of state firms last year — says it will tackle a US$399,5 million TelOne legacy debt, to bolster the fixed line telephone operator’s capacity to secure loans.
Banks have turned down TelOne’s efforts to raise capital, citing the massive legacy debt, according to chief executive officer Lawrence Nkala.
However, the firm competes in a dynamic sector with ever-shifting technologies, which requires it to keep pace.
Bigger threats have recently emerged from global firms like Starlink, which was recently given the nod to operate in Zimbabwe.
TelOne plans to spend about US$30 million on capital expenditure this year alone.
It took over the legacy debt when the government unbundled the Posts and Telecommunications Corporation (PTC) over 20 years ago.
“Our balance sheet looks good, aside from inherited loans from PTC that are a challenge,” Nkala told delegates, including representatives from MIF, and the firm’s annual general meeting last week.
“If those loans were removed, we would post positive results, as seen in our financials. When it comes to looking for capital, banks need our books so that we can get financing. And, when they see our legacy loans, it makes it hard for them to give us long-term financing. Now we are only managing to get short-term loans like 12 months and 24 months if I am lucky.”
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In 2019, the government committed to taking over TelOne’s legacy debt obligations. But Nkala said that despite the talk, no action has been done yet.
State firms owed TelOne about $150 billion (about US$24,57 million) as of the first quarter, which the government last week undertook to address.
TelOne’s legacy debt left the firm in a net liability position of $177,7 billion (about US$29,1 billion) as of the end of last year, according to the firm’s financial statements.
MIF assumed full control of TelOne after President Emmerson Mnangagwa renamed the sovereign wealth fund last year, giving it the big assignment to take charge of 30 state firms.
Other firms taken over by MIF included Defold Mine, Zupco, Kuvimba, Silo Investments, National Oil Company of Zimbabwe, Cold Storage Commission, Petrotrade, POSB Bank, NetOne, National Railways of Zimbabwe, TelOne, Arda Seeds, Zimbabwe Power Company, Powertel, Allied Timbers, Telecel Zimbabwe, Air Zimbabwe, Industrial Development Corporation, Cottco, AFC Limited and Hwange Colliery.
These were later joined by power utility Zesa Holdings, Homelink Private Limited, HomeLink Finance, Fidelity Gold Refinery, Export Credit Guarantee Insurance Corporation of Zimbabwe and Aurex.
Many of the firms are saddled with debts.
Others, such as the National Railways of Zimbabwe, are seeking funding to capitalise their operations.
Responding to Nkala’s presentation, Ernest Denhere, deputy chief investments officer of MIF, said the fund was determined to see a well-functioning TelOne.
He said MIF was looking at several options in dealing with the issue.
“The legacy debt you are describing, as a shareholder, we will look at it,” Denhere said. “The loans that you have in your book, a lot of them are foreign currency denominated. We need to look at engaging mechanisms where we can ensure somehow at the point they need to be serviced.
“There are initiatives of African Development Bank (AfDB). There is an AfDB visit coming up shortly. We will see if we can accommodate TelOne into some of those discussions to see whether we could do some local currency hedging mechanisms that match the tenure of your planned funding.”
In a strategic move, TelOne says it has partnered with Eutelsat OneWeb, a British-based global low-earth satellite communications network firm to resale its products in the country, providing competition to the recently licenced Starlink.
Nkala said the commercial terms of the deal are yet to be finalised, the deal would be key for TelOne.
