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Foreign Suppliers Threaten To Cut Off Telone Due To $18 Million Debt: The Parastatal Is Technically Insolvent

Telone revises voice tariffs, debt

Critical foreign suppliers that include WIOCC are threatening Telone with service disruption according to a report submitted to the Parliamentary Portfolio Committee on Information Communication Technology, Postal and Courier Services( since that is quite a mouthful we will just call it the committee from now on).

According to the chairman of the committee, Carlton Hwenje, Telone owes about $18 million to about four critical foreign suppliers. Among the major ones are the WIOCC, TDM Mozambique and China-Exim Bank.

Why are these debts critical?

The debt to the West Indian Ocean Cable Company (WIOCC) is particularly concerning as they are the owners of the EASSy cable which provides most of Telone’s upstream internet bandwidth. If Telone were to be cut off from this cable it would make it hard for them to provide internet connectivity to their customers. With the continuous fall in voice revenue, service disruption on the internet front could well be an existential threat to Telone.

TDM also provides an important link from the border to Mozambique. To underscore its importance, the last time TDM had a problem for example: Telone ASDL was reduced to a crawl.

I recall Telone was once cut off by its upstream providers during the 2008 days. Again this was due to defaulting on its international commitments. There were not many international internet gateways back then. Every time I dialed up and went online and tried to access foreign-hosted websites like Google I was greeted with a connection error. The internet was now reduced to a Zimbabwean intranet.

TelOne also owes China-EximBank $500 000 loan repayments. This amount is supposed to be part payment on the $98 million loan facility which was used by the parastatal to fund the first phase of the National Broadband Project. If Telone fails to repay this loan it will mean they are not going to be able to get more funds to continue implementing the National Broadband Project.

Telone Blames PTC

According to its Statement of Financial Position (Balance Sheet in laymen terms), Telone is technically insolvent. What this means is that its liabilities (fancy name for debts) are more than its total assets. This is largely because of $380 million in loans that Telone inherited from the accursed PTC of yore.

Add good fashioned bureaucracy into the mix

As if that is not bad enough Telone is owed bucket loads of money ( about $178) by all sorts of people including ordinary citizens who are unlikely to pay up anytime soon. However the parastatal is owed a staggering $98 million by the government. The Zimbabwean government directly owes $73 million while its state-owned entities owe about $25.

This has seen Telone struggle to service its local debts as the government and its extensions are simply using up resources for free. As a result of Telone also owes Potraz, ZIMRA, interconnect partners and the pension fund. These creditors (except interconnect partners) are ironically essentially the government by different names. To rub salt to the wound ZIMRA (also the government) actually went on to add a penalty of $10,9 million to the amount Telone owes them.

There should be more business in government

Most of these complications are arising because these state entities are not being run on a commercial basis. If they were they would be more diligent when it comes to revenue collection. Telone’s service delivery has improved significantly in recent years, to the point where it is at par and even exceeds its competitors’ in some ways, but it is being let down by legacy loans and the government not settling its debts.

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