'Bust Telecel needs $300m'

HARARE - Zimbabwe's third largest telecommunications company, Telecel, is “technically insolvent” and needs about $300 million to stay afloat, businessdaily has learnt.

This is at least according to information contained in Empowerment Corporation (EC) managing director Patrick Zhuwao’s court affidavit over the 40 percent sale and war.

In the papers, the ex-deputy minister said the mobile telecommunications giant’s net asset value has significantly deteriorated in the last two years, hence the need for urgent recapitalisation.

“The audited financial statements of Telecel Zimbabwe for the year ending December 2013 show clearly that the total assets of Telecel Zimbabwe are $216 million,” Zhuwao said in an affidavit filed at the High Court.

The President Robert Mugabe nephew said Telecel’s current and non-current liabilities, were in the region of $203 million, thus leaving a net asset value (NAV) of less than $15 million.

“Further, the financial position has since then significantly deteriorated to an equity (NAV) position of less than $100 000, by end of 2014," he said.

“Further and in any event, Telecel has not fully complied with licensing requirements and has up to the end of February to satisfy all requirements. Telecel is therefore seriously threatened by licensing risk,” Zhuwao added.

This comes after another Telecel shareholder, Jane Mutasa, last week asked the High Court to block the disposal of 80 million shares held by EC to Brainworks for $20 million arguing that the transaction would prejudice small shareholders from realising the full value of their shares.

“The... applicants stand to lose all their lifetime investment they had made in Telecel Zimbabwe (Private) Limited through the 6th respondent as their investment vehicle which has ever increasing value well in excess of $200 million and is sought to be donated or to be given away for as little as $20 million,” Mutasa said.

Zhuwao, however, said given Telecel’s current financial position it was strange that Mutasa had pegged EC’s 40 percent shares at $200 million.

“Further and importantly, the business requires capital in the short-term to enable it to undertake network improvements and undertake other capital activities all of which requires about $150 million. Cumulatively Telecel requires in excess of $300 million to validate its license and to undertake capital improvements on the network side to restore its competitive stamina in the market,” he said.

Zhuwao noted that the shareholders hold primary responsibility through equity to raise the capital required and this translates to $120 million which EC must inject in Telecel to enable the company to meet its short-term requirements.

“It is mischievous and highly-misleading for 1st -3rd the Applicants in their stature, to advance the contention that the value of the business is in excess of $500 million. This is simply incorrect,” he said.

Telecel’s minority shareholders have been engaged in shares wrangle for the past decade but the squabbles intensified recently after the telecommunications’ parent company, Vimpelcom, indicated its intention to dispose 60 percent shareholding in Telecel.

However, Vimpelcom has been facing difficulties in divesting its third sub-Saharan asset — Telecel — as frictions and complexities with the government and local shareholders have impeded any process thus far.

Zhuwao said the continuous shareholder wrangle has become a barrier to various opportunities that have presented themselves to EC.

“Telecel International, for instance which has a 60 percent stake in the entire business, has rejected an offer by EC to purchase the 60 percent shareholding. This is primarily because Telecel International directors have simply branded discussions with Empowerment Corporation as “difficult”,” he said.

Telecel International is owned by Vimpelcom.

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