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Minister confirms government’s move for Telecel, hints at foreign investment

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So it’s already been confirmed, the government is moving in on Telecel. Earlier today, the Minister of ICT, Supa Mandiwanzira, responded to questions on the government’s interest in Telecel Zimbabwe by referencing the same remarks he shared in Parliament yesterday.

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A report carried in the Herald cites the Minister’s response to questions that were raised by other legislators regarding the takeover of Telecel. Mandiwanzira mentioned that the government, through state-owned Internet Service Provider ZARNet, is in negotiations to buy Telecel with another local institution, CBZ Bank facilitating the deal and acting as the financial adviser.

According to the Minister, ZARNet has been roped in because the government does not have the immediate capacity to execute this takeover. All this has come after the government accepted the offers made by the Empowerment Corporation and Vimpelcom, the two shareholders in Telecel Zimbabwe, to offload their stakes.

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One issue that hasn’t been clarified is how the Telecel takeover will be financed. ZARNet is hardly primed to handle a huge takeover of a mobile operator. The operator that would have seemed geared for any sort of MNO deal, TelOne, is already licenced and making plans to launch its own mobile network.

This will, in all likelihood, be executed with leveraged finance. Speaking after today’s breakfast meeting, Mandiwanzira pointed out that globally,

..markets are awash with capital for telecoms deals.

If you pair that, with the information he shared with the Parliamentary Portfolio Committee on ICT some months ago on the handful of offers that have been made for Telecel from foreign investors, the operator is looking at outside investment. The only difference this time will likely be an enforcement of indigenisation laws.

One strong possibility could be Chinese investment. Chinese capital has oiled projects for the government’s own mobile operator, NetOne, and through the same Zim-Sino understanding, projects like the National Digital Migration and NetOne’s LTE expansion have been carried out.

With a strong push made in solidifying these relations and negotiating other mega deals from our friends from the East, maybe Telecel will move from Dutch investors to Asian investors that already have a finger in the Zimbabwean tech pie.


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34 thoughts on “Minister confirms government’s move for Telecel, hints at foreign investment

  1. What foreign investment??

    Even myself as Zimbo l would not go anywhere near Telecel knowing its slow bleeding death have begun in honest.

    The only benefitor in all this mess is Econet. Telecel will be reduced to a shell company that means one less competitor for Econet.

    Econet will go back to be a massive monopolly bully who can charge whatever they want.

    In trying to fix Econet, Mandiwanzira and co. have actually give Econet more golden opportunities to do whatever they like.

    I bet Strive is thanking his loving God for this!

    And its the masses who like always loose. Welcome to Zim business mentality forks!!

  2. This is ZIMASSET. Government in full time business operations. Ask Mavhaire about the role of the private sector in electricity! Econet is the next, what with salary cuts and shorter working days?

  3. What do u mean Telecel will be reduced to a shell? Its very much obvious that Telecel is insolvent as we speak and has no financial capacity to finance expansion projects. What’s wrong with government taking over telecel . If Telecel agreed on the takeover o don’t think we should question why?

    1. Why should the gvt take over Telecel when they can not put their house in order. They have a lot of disfunctional telcos which are always operating and huge losses regardless of getting massive cheap loans.

      Telecel and the moment is surviving on what they are generating and should gvt continue with the takeover, they will join the list of corrupt ridden gvt companies who specialise in buying buildings and poshy cars

      1. If Telecel agreed then I don’t see a problem with government buying it out. For the record apart from the $218million loan and the $45 million loan in 2011 Netone did not have any capital injection from the shareholder. It relied heavily on internally generated cash and short term loans from banks at high interests rates to fund expansion whilst Econet invested over $900 million from its shareholders and borrowings from international markets. On the other hand Telecel got support from Vimplecom and also got $70 million in 2011. There you go on comparing these two companies with Netone yet they had advantages. Furthermore the two companies don’t have to go through the govt tender board where Netone’ s expansion strategies and innovations are exposed to its competitors and hijacked before implementation. The recent $218 million loan was delayed for over a year when Net one’s competitors sponsored someone to drag Netone to court claiming he should have bid for the tender when he could not manufacture a basic cable. So in that sense it is critical that government buys Telecel and merges it with Netone effectively ending Econet’s monopoly which is causing it to treat customers with impunity. A Netone / Telecel merger would ensure that the companies will have in excess of 1800 base station sites well ahead of Econet’s 1300 sites. This would create a more resilient and stable network with sufficient capacity and Econet will up their game . The end result will be consumers benefitting.

    2. Richard this govern has taken over companies for Mutumwa Mawere and what happened after the that. In my beloved country it looks like if you are a polical enemy to ZANU you won’t survive in business. Indigenization is in ZANU PF’s vocabulary only when you support them

  4. Who is really benefitting in all this? The Govt/Potraz? The people of Zim? Supa? Both parastatal telcos NetOne/TelOne have been performing poorly since time immemorial, they dont pay they USF levies, dont pay their Potraz licensing, dont pay their interconnection dues, and Govt will tackle this unacceptable state of affairs by making yet another bid, without the any funds available mind you, to “take up a stake in Telecel” – why cant we get Ministers from the vast pool of telco professionals who actually cut their teeth as active players in the sector locally and abroad. People who know what they are doing based on rich experience and know what it takes to trully have a level playing field in the sector, who know how to protect and grow the sector, not one where ICT Ministers have vested interests in limping insolvent telcos that they are trying to acquire cheaply and using their priviledged positions to do so. Hon Supa, the telecom sector is your charge, you are beholden to protect and develop it for the greater good of the nation, particularly the much needed revenue growth and employment in the sector. This incestuous infatuation you have with Telecel must stop forthwith, stop it!

  5. The gvt is targeting a leveraged buyout. But the problem here is that they are hardlu equipped for it they will hure some friend to be ceo and he/she wont deluver meaning the owner of the leverage gets telecel for peanuts.
    Leave telecel for the corporates and fix netone

  6. Guys can you do a feature on online shopping which websites deliver to zim, duty etc

  7. If Telecel agreed then I don’t see a problem with government buying it out. For the record apart from the $218million loan and the $45 million loan in 2011 Netone did not have any capital injection from the shareholder. It relied heavily on internally generated cash and short term loans from banks at high interests rates to fund expansion whilst Econet invested over $900 million from its shareholders and borrowings from international markets. On the other hand Telecel got support from Vimplecom and also got $70 million in 2011. There you go on comparing these two companies with Netone yet they had advantages. Furthermore the two companies don’t have to go through the govt tender board where Netone’ s expansion strategies and innovations are exposed to its competitors and hijacked before implementation. The recent $218 million loan was delayed for over a year when Net one’s competitors sponsored someone to drag Netone to court claiming he should have bid for the tender when he could not manufacture a basic cable. So in that sense it is critical that government buys Telecel and merges it with Netone effectively ending Econet’s monopoly which is causing it to treat customers with impunity. A Netone / Telecel merger would ensure that the companies will have in excess of 1800 base station sites well ahead of Econet’s 1300 sites. This would create a more resilient and stable network with sufficient capacity and Econet will up their game . The end result will be consumers benefitting.

    1. I stand to be corrected! Maybe you have valid points. But to me with the level of corruption in gvt owned companies l do not see this as the best course of action.

      Supa might have the energy, bt knowing how Zanu/gvt works, there is a lot of untouchables in gvt who do whatever they like and Supa anotumwa kunofudza mbudzi kana vakuru votanga kunokora muhomwe yeTelecel.

      Getting back to the point,

      ○how much does Telecel owe Econet in transfer fees?

      ○How much does each telco paid into USF for infrastructure sharing?

      ○How much do each telco pay in land tax to build base station?

      ○Who still owe licensing fees and why are some telcos not paying?

      ○Why was telecel allowed to operate with a patch licence for years?

    2. You are obviously not an Economist or an accountant! Capital and Funds injections can easily be hidden in ways that make them difficult to weed out. For example NetOne has been receiving part of the $150+ million in licence fees that others are paying and they are not.

      Other operators pay taxes but Netone does not even when they make profits, savings are income from the government as well.

      I could go on but I am sure you can see the picture. Netone by the way is a private limited company which has to pay both its licence fees and taxes. It’s just that the government chooses not to make them pay which in essence makes these injections into Netone.

      1. Its just a perception that netone does not pay taxes. If yu look at their report for 2014 you will realise that Netone made a $3 million profit, the first of its kind after year on year losses due to undercapitalisation from the shareholder who did not invest a cent prior to 2011 whilst other competitors were investing. Of that $3m profit govt actually owes in excess of $10m to netone in unpaid dues for contract lines. Also the profit was being threatened by Zimra for VAT yet Netone did not collect a cent from what it is owed. It is also wrong to day Netone does not pay license fees. Infact contrary to peoples misconception Netone’s license is due to expire in 2017. U may ask why when it started operating in 1996 yet Econet started operating in 1998 but has paid its fees. The reason is when Netone started offering cellular services it did so as a division of PTC and thus operated under PTC’s license up to year 2000 when PTC was unbundled to form Telone, Netone and Zimpost. Netone then renewed its license and started operating on its own hence the license is still valid under law up to 2017 contrary to peoples misconceptions that it is favoured. It is not favoured. About Telecel being given the conditions to pay in installments, it was an issue they raised with Potraz that they did not have adequate financial muscle to pay at once. Econet for its part did not pay the whole fee but used its interconnections fees owed by gvt providers to offset part of the fees. If Netone got half the amount that Econet invested in since dollarisation do u think they would be trailing given the fact that Netone had the first mover advantage?? We cannot compare an undercapitalised entity with a heavily capitalised entity when those two companies are not on equal footing. Right now Netone is implementing a national mobile broadband project whose effect is to give 3G at every tower in both urban and rural areas where 2G is available. They will soon launch 4G Lte at 300 towers across Zimbabwe compared to Econet’s 20 towers at selected spots, yet the latter is heavily capitalised. They are also installing 1336 2G base stations to increase coverage countrywide. Add 175 , 60 metre towers in both rural and urban areas u can see the positive effect of capitalising govt owned entities. Add The merger with Telecel and u get a more efficient system that ends a monopoly in the sector. That monopoly was bad for the sector since it gave the operator the freedom to abuse customers, bully suppliers and get away with impunity since the other operators had no financial muscle. In essence let the govt take over Telecel and merge it with Netone, then find a strategic investor like MTN to come and inject capital on a 51:49 ratio. Thats good for the country.

  8. Its just a perception that netone does not pay taxes. If yu look at their report for 2014 you will realise that Netone made a $3 million profit, the first of its kind after year on year losses due to undercapitalisation from the shareholder who did not invest a cent prior to 2011 whilst other competitors were investing. Of that $3m profit govt actually owes in excess of $10m to netone in unpaid dues for contract lines. Also the profit was being threatened by Zimra for VAT yet Netone did not collect a cent from what it is owed. It is also wrong to day Netone does not pay license fees. Infact contrary to peoples misconception Netone’s license is due to expire in 2017. U may ask why when it started operating in 1996 yet Econet started operating in 1998 but has paid its fees. The reason is when Netone started offering cellular services it did so as a division of PTC and thus operated under PTC’s license up to year 2000 when PTC was unbundled to form Telone, Netone and Zimpost. Netone then renewed its license and started operating on its own hence the license is still valid under law up to 2017 contrary to peoples misconceptions that it is favoured. It is not favoured. About Telecel being given the conditions to pay in installments, it was an issue they raised with Potraz that they did not have adequate financial muscle to pay at once. Econet for its part did not pay the whole fee but used its interconnections fees owed by gvt providers to offset part of the fees. If Netone got half the amount that Econet invested in since dollarisation do u think they would be trailing given the fact that Netone had the first mover advantage?? We cannot compare an undercapitalised entity with a heavily capitalised entity when those two companies are not on equal footing. Right now Netone is implementing a national mobile broadband project whose effect is to give 3G at every tower in both urban and rural areas where 2G is available. They will soon launch 4G Lte at 300 towers across Zimbabwe compared to Econet’s 20 towers at selected spots, yet the latter is heavily capitalised. They are also installing 1336 2G base stations to increase coverage countrywide. Add 175 , 60 metre towers in both rural and urban areas u can see the positive effect of capitalising govt owned entities. Add The merger with Telecel and u get a more efficient system that ends a monopoly in the sector. That monopoly was bad for the sector since it gave the operator the freedom to abuse customers, bully suppliers and get away with impunity since the other operators had no financial muscle. In essence let the govt take over Telecel and merge it with Netone, then find a strategic investor like MTN to come and inject capital on a 51:49 ratio. Thats good for the country.

  9. Richard Richard Richard all I’m hearing from you is “if Netone had raised the same capital as Econet this/that would have happened blah blah” – Shoulda Coulda Woulda none of that happened mate!!! Netone didnt raise as much funding as Econet so thats already a failure on their part – why didn’t they raise as much funding? thats the question you need to be asking yourself so you can gravitate to the reality that you are missing here, you can have excuses or you can have results buddy so lets not go down that “dai NetOne yakadai, ingadai yakadai, yakadai yakadai” road – which must tell you something about Zim Govt-run entities/parastatals i.e. that model DOES NOT WORK in Zim for the telecoms sector. Govt is too cash-strapped / corrupt / not accountable / lethargic to effectively and fairly compete in an Industry as dynamic and fiercely competitive as telecoms and its very real and constant exposure to overnight tech disruptions such as OTT, WebRTC, sim-less handsets etc etc. For 2014 Netone had 27% of the mobile market and Econet has 54%.and if you do your math you realise that since Econet made turnover of 746m and profit AFTER TAX of 70m for the year, then NetOne sould have made at least turnover of 373m and PROFIT AFTER TAX of 35m – however they managed turnover of 110m and operating profit BEFORE INTEREST, TAX AND DEPRECIATION of 3m. This tells you that based on what we know of Netones borrowings (interest) and Asset base (depreciation), there was NO PROFIT TO TAX at all as they made a TAX LOSS after deducting interest and depreciation from the misleading “operating profit” figure of 3m. How can you you be owed more in unpaid cellphone bills (10m) than your operating profit (3m)????!!!! Tipeyi ma serious Richard kana iwewo sha – the fact is that the Govt fiscus, Zim economy and employment prospects would benefit more from a situation of a privatised NetOne/TelOne/Telecel where the entities are professionally and competitively run by the best brains the sector has to offer. If as you claim the modus operandi of a parastatal requires it to issue public tenders for any projects it embarks on, then that right there is a clear indication that Zim parastatal telcos already have yet another crippling disadvantage compared to those run by private capital (ie read lean, mean, effective, resilient profit-making, employment-generating, tax-paying, economic growth-enhancing entities). Govt needs to be sorting out water, electricity, roads, rail, economic growth, tax revenue base expansion issues etc and leave private enterprise to private capital while acting as a referee and tax collector – certainly in telecoms this will actually create a much larger revenue base for the national fiscus, economic growth, higher employment prospects, etc etc than the current blood-letting that’s been happening on Parastatal income statements and balance sheets for the last 3 decades. Govt’s idea of dabbling in telecoms is that they must allow Govt departments to rack up $10m in unpaid cellphone bills, not pay Potraz licensing and interconnection fees (yes Richard, Netone hasn’t paid these yet check your facts), forcing the market leader to share sites (where do you get your facts Richie? Econet has 3019 base stations, Telecel 980 and Netone 887 check with Potraz and please dont mislead the public), and leveraging on Govt infrastructure to avoid direct expense for sites. With Telcos in the hands of private capital, Govt would be able to raise even more infra-share revenue from Govt infrastructure (NRZ, Transmedia and former PTC towers) than the token amounts that NetOne TelOne etc are NOT PAYING for use of said infrastructure. Let’s start using our brains Richard, lets look at the real facts and candidly define the real problem in Telecoms with the clarity of vision that is required when one is in a situation of national crisis. Zvidzidzo gore rino…

  10. Shaa you are right somewhere but also wrong on other points. Base stations do not necessarily mean sites. An example is Econet can have 4 base stations at one site/ tower comprising of 3g, 4g and 2 by 2g base stations ie 900mhz and 1800mhz frequency. Check Potraz list of consultation questions and responses on infrastructure sharing framework, Econet confirms it has about 1300 sites/ not base stations. There is a big difference between a site and a base station. A site is the tower or building whereas a base station is the equipment inside the container . A typical 4g base station will have 4g, 3g and 2g base stations in the container . As for comparing profits by halving what Econet raked and saying netone should have that its not what market dynamics follow. Econet has average revenue per user of $9 due to exorbitant prices whereas Netone has average revenue per user of $3. Its obvious that revenues would not be the of the same trend. Its a well known fact that Netone is 100 percent state owned and relies sorely on the gvt to fund it whereas Econet is a public listed company who relies on borrowing from the capital markets a situation that cannot happen to state entities. The government could not guarantee a $40 million loan for Netone prior to 2006 that would have made it impossible for Econet to overtake Netone in 2009. I am not advocating for corruption or anything but I think its unfair to accuse Netone management for laziness when the shareholder did not invest a single cent into it. Credit should be given to the management for growing the company to second position using meagre collections. Having said that I support your decision to let gvt find partners with deep pockets to takeover state firms on an acceptable ratio just like what happened to global giants like Vodacom South Africa and Safaricom Kenya. in a few weeks time you will see the results of the loan that Netone got. U will see the 4g coverage and 3g high speed in both urban and rural areas. U will appreciate how Shareholder support is important in business and see why I say its good to compare companies that are on equal footing. And I still say the monopoly must end. Let telecom players compete on technology not on financial muscle. Econet is not being forced to share infrastructure but sharing is on a one on one basis. If Econet does not wish to share fine but they should be assured that Netone is putting 668 sites to bring its number to 1268 sites . In that case can they still say they are being forced to share??

    1. Had you paid close attention to the ministers $950/head speech,you would have heard him declare that asking for one-to-one sharing is “colonial thinking”.

    2. Oooh Richard laziness, singing party slogans nekutamba kongonya is what gets you a job in gvt.

      You are not realising that you are agreeing that gvt should not be involved in telco business because the gvt does not have professionals to do the job hence corruption and party operatives working as CEOs in every institution.

      1. Kkkk if that’s the case I rest my case Macd Chip. But for the record Netone CEO is a telecomms engineer. I don’t know how lazy he was or how much kongonya he danced to get that job.

  11. Like I said Richard you can have excuses or you can have results. Right now you+Netone have excuses and Econet has results. Nobody cares about excuses we all want results. We cant keep explaining away why things are bad in Zim without actually getting results. There is a saying that the definition of a fool is someone who keeps doing the same thing and expecting a different result. Plus Econets 54% market share is not a “monopoly” it looks like your speech is motivated by breaking Econets “monopoly” – this I’d the kind of mentality driven by envy when the winner creates enemies due to his success and the losers gang up to unfairly cripple the winner to the detriment of both winner and loser. Forget trashing Econet it’s a market leader not a monopoly but rather focus on privatising Netone Telone etc so that they can compete on equal footing with other Telcos the world over. Govt is the worst type of shareholder in a Telco arena. Plus the fact that you believe combining Netone and Telecel will allow them to overtake Econet because they now have “more sites” is flawed thinking. The broadband based networks of the future will rely more on speed and less on coverage for competitive advantage. More importantly they will rely more on superior managerial aptitude to steer telcos in an increasingly hostile operating environment, and despite your sympathies with Netone they clearly do not have the the requisite calibre of management to tackle Econets super efficient money making machine, let alone stay afloat, without resorting to goalpost changing legislation that kills the industry, employment, and innovation in the sector. Netone and 99% of parastatals have dismal performance due to less than mediocre management. Results speak for themselves let’s not make excuses

  12. Its obvious that you are mixing things in your analysis. We are talking about the mobile sector and you are now involving other Parastatals . What for. I was only explaining to you the reason why Netone despite your criticism cannot be compared with a resource laden Econet but all you say is that it must compete despite the fact that u acknowledge it is under capitalised. We can have this argument over and over again but one fact will remain. The three mobile operators are not on equal footing. It would be naive and blind to say someone who invested $1,2 billion (econet) should be on the same level with someone who invested $150 million (netone) , even common sense will tell you that the other has more resources at disposal. Even a CEO from space cannot compete with such a competitor. And excuses will always be there because of that.Let’s not mix Netone with other parastatals. For the record the Netone CEO is a telecoms engineer in his own right.

    1. Your narrarive seems to suggest that Econet always had the bigger war-chest from day 1- which is simply not true. Because of the first-mover advantage, NetOne had the largest coverage for a while.

      Where did Econet conjure up the capital? They had to get loans, this entailed having the vision and ability to convince shareholders and financiers (i.e. having competent corporate leadership)

      Nothing you have said convinces me that Netone’s leadership could not have done the same: unless you are saying the CEO tried and the gvt blocked him. Either the problem is the leadership or the shareholder: I don’t see any movement towards identifying or rectifying the root cause.

      P/S: compare number of CEOs that Econet has had over the same period, starting with Strive Masiyiwa. Old dogs , new tricks and all that.

  13. For NetOne to borrow it has to first seek approval from the parent Ministry of ICT then the ministry seeks approval from treasury which is the Ministry of Finance. If Finance does not approve then Netone has to make do with its own coffers to finance network expansion. If however finance agrees netone has to submit itself to the state procurement board which floats tenders and the two processes may take several months for Netone to purchase equipment. Econet does not go trough the same process but only a board meeting and they order equipment. Econet always had that advantage since inception. The first tender that launched Netone in 1996 was delayed by as much as 18 months. In telecomms business time is money and whoever has resources and is able to make decisions quickly wins. Look at other markets where Econet is battling out with seasoned and more bigger companies. Look at Econet Lesotho it trails to Vodacom, look at Econet Kenya it trails by far to Safaricom Kenya. Same with Econet Burundi its the same. The situation is the same here. Econet is successful coz of deep pockets and the only advantage they have is money and infrastructure,, thats their main advantage, but that benefit is not seen on its subscribers.

    1. You listed a lot of countries where Econet it ‘battling it out’ with bigger companies. One question though: are any of those companies government-owned? If they are private, why would you the circumstances are comparable to Zimbabwe?

  14. Again still making excuses for Netone, ie they couldnt raise as much money as Econet so they couldn’t compete. So now we must hold Netone’s hand and help them compete is that what you’re saying. Why have a parastatal telco to begin with if all it does is perform badly because its modus operandi doesn’t allow it to compete as effectively as a private capital telco? Let me ask you this simple question Rich, if Econet made 746m sales last year, Netone made 110m sales last year, Econet paid over 110m in VAT and 21m in USF levy and 53m in Corporate Tax and 9m in Ecocash Agent Commission and 73m in Airtime reseller agent commission and 84m in staff costs, who do you think benefitted the Zim Govt fiscus and Zim economy and Zimbabwean people more – Econet or Netone? If you say Netone I rest my case and totally give up on you Rich kkkkkk. No point being a loss-making telco with the lowest rates on the market if all you’re doing is contributing to the shrinking of the national economy while limiting employment prospects for everyone. There is actually a benefit to having high ARPUs Rich, its not just for Econet’s benefit, the Economy benefits in a big way, if you make more money you can invest in more businesses and opportunities, employ more people and contract more companies to supply services to you, if you make losses you just eliminate whatever opportunities and doors would have opened up had you not made those losses. Profit is life, losses are death Rich, let’s not make losses OK

  15. Let’s judge Netone after this $218 million loan when Potraz statistics are out. Coming to your question, Yes Econet benefitted the country but it should be noted that Econet has 9 million subscribers Netone has 3 million subscribers so revenues won’t be the same. I didn’t say that we must raise Netone’s hand for it to perform but let’s wait and see the results now that they finally got capital expenditure. Let’s if they don’t perform then judge them accordingly.

    1. Statistics will come out towards elections and l bet they will be really good! They will show money well spent for Netone.

  16. Yes “but it should be noted that Econet has 9 million subscribers Netone has 3 million subscribers so revenues won’t be the same.” BUT having more subscribers does not necessarily mean more revenue. It’s the quality of the subscribers which matters! More small spend clients may not be as good as fewer BIG spend clients.

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