Farai Mabeza, Senior Staff Writer 
STATE-owned telecoms operator TelOne says delays in approval of US dollar-indexed tariffs are threatening the viability of the industry.
In a trading update released after the company’s annual general meeting last week, TelOne said the delay comes amid acute operational challenges owing to exchange rate volatility and the consequent impact on the debtors’ book.
“The industry and TelOne, in particular, is affected by the delay in the approval of a tariff that is index linked to the United States dollar (US dollar).
“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:ZW$928 and has since deteriorated by 582 percent to US$1: ZW$6 326.
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“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,” acting managing director for TelOne, Lawrence Nkala, said in the update.
Aggregate demand on the company’s products, however, remained high despite the operating environment challenges.
“Home broadband recharges increased by seven 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,” Nkala said.
According to the update, the government accounts for 51 percent of the total debtors’ book of $42,8 billion as at May 31, 2023.
The government owed TelOne $20,5 billion as at May 31, 2023, from $6,6 billion as at December 31, 2022.
“A significant portion of this debt, about $8 billion was accrued prior to March 31, 2023 when the debt was an equivalent of US$8,6 million. However, due to the depreciating ZW$ against the US$, 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,” Nkala said.
“TelOne is pushing for a timeous settlement of bills to preserve the time value of money and allow the company to settle its obligations.”
Despite the challenges, which the company says 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.
TelOne reported that it has legacy loans amounting to $268,4 billion (US$394 million).
“Confronted with capitalisation needs of US$50 million per annum, TelOne continues to search for an investment oasis on the back of legacy loans that have had a negative effect on the business’s financial statements.
“Resultantly, this situation has adversely affected TelOne’s ability to attract external funding, particularly capital expenditure for transmission network deployment,” Nkala said.
“For the period ending December 31, 2022; the business had funded capital expenditure of US$9 million using internally generated resources. However, foreign currency generation from business operations was impacted by customer preferences to settle bills in local currency along with shortages of foreign currency on the auction market.
“This diminished the business’ ability to fund capital expenditure towards network expansion and upgrades,” he added.
TelOne said it was also under threat due to network theft and vandalism, especially on the copper network, with at least
US$510 000 being recorded in lost revenue and network elements for the period ended December 31, 2022.
These losses stemmed from 402 network vandalism incidents being recorded during the year, translating to a 20,7 percent increase compared to the prior year.
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