Telecel Zimbabwe set for corporate rescue

Due to serious financial distress, Telecel Zimbabwe, the smallest of the three mobile phone operators in the country, is set to be placed under corporate rescue.

The Communication and Allied Service Workers Union of Zimbabwe has filed papers in the country's High Court asking for corporate rescue, citing that Telecel is insolvent and faces liquidation if no rescue action is immediately taken. Aurifin Capital's Knowledge Hofisi has been nominated as the corporate rescue manager.

"The worsening performance indicates the existence of a material uncertainty that may cast significant doubt on the company's ability to continue operating as a going concern," said the union's secretary general David Mhambare in court papers.

The court application added that as of December 31, 2021, Telecel's assets were US$1.5 billion against total liabilities of $24 billion, pointing to negative equity of $22.5 billion.

Mhambare said corporate rescue is ideal in the circumstances because it affords Telecel an opportunity to rehabilitate the company and obtain a moratorium from the execution of judgments by litigants.

Rising rates of dropped calls, poor reliability and network outages have impacted Telecel's operations. According to the union's application, the telco accounted for only 2.6% of overall mobile industry revenues in 2021.

Globally, telcos are investing in 5G, and in Zimbabwe, there has been increased investment in 4G/LTE. However, Mhambare stated that Telecel hasn't invested adequate resources towards 4G/5G network deployment compared to its competitors.

Zimbabwe's mobile woes

Zimbabwean telcos have been going through a difficult period this year. In July, the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) approved tariff increases to help them survive rising input costs.

The last time the regulator ran a tariff review was in September 2021, and since then, Zimbabwe's inflation has risen from around 50% to more than 190% as of June 2022. With a sluggish economy weighing on the telecom market, the request to place Telecel under corporate rescue is unsurprising.

Want to know more about telco financials, regulation and deals in Africa? Check out our dedicated Business of Tech content channel here on Connecting Africa.

According to statistics from market research company Omdia, a sister company of Light Reading, Econet is by far Zimbabwe's biggest mobile operator. It had almost 63% market share in the second quarter of 2022 with 9.6 million users. NetOne Zimbabwe has about 34% market share, while Telecel Zimbabwe accounts for the remaining 3% of subscribers.

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*Top image source: created by Allexxandar - www.freepik.com

— Matshepo Sehloho, Associate Editor, Connecting Africa