TelOne project draws down $33m

HARARE - Fixed telecommunications operator, TelOne, said it has so far drawn down a total of $33 million from the China Exim $98 million facility for its modernisation project.

This comes as the company moves to introduce more services to counter the decreasing voice revenue.

Telecommunications voice revenues continue to nosedive globally mainly due to the rise in the use of Over the Tops (OTTS) services such as WhatsApp, Facebook, Viber among others.

TelOne, which began implementing the National Broadband Project (NBB) last year, is also witnessing a sharp voice revenue decline. The parastatal has witnessed a 43 percent drop in voice revenue between 2013 and 2016.

“In the face of voice business reduction, the company is targeting to increase broadband contribution to 48 percent of total revenue by 2020 up from the current 20 percent.

“Voice revenue will now contribute 43 percent of total revenue down from the current 66 percent,” TelOne said.

The State-owned telecommunications firm will also bring in new product lines such as cloud services and value-added services as the business model transforms to converged ICT Services.

This deliberate transition from a purely fixed voice business to becoming a fixed mobile converged company with an emphasis on broadband, cloud and digital services is expected to see the company return to profitability within the next two years.

The delay in the commencement of the implementation of the National Broadband project which only started in 2016 instead of 2014 due to the lengthy process of all conditions precedent for the fulfilment of the loan with China Exim Bank, resulted in the company having to delay the consequent transition to become a fully broadband driven business.

However, the project implementation which is expected to run for 24 months will now see the company being able to transition to a wider fibre broadband network platform which will reverse the negative revenue trend and drive profits to $17 million by 2020.

The voice revenue decline coupled with depreciation increase, Interest charges and exchange losses from legacy loans which now amount to $360 million have resulted in TelOne posting its first loss in 3 years.

The asset revaluation exercise which resulted in the company’s assets increasing by $88 million from $230 million to $318 million while improving the company’s balance sheet has doubled the depreciation charge from $14 million to $27 million.

Interest charges and exchange losses from legacy loans amount to $20 million compared to a positive of $4 million.

These non-cash expenses totalling $47 million impacted negatively on the company’s 2016 overall performance and TelOne has already engaged its shareholder to warehouse the loans as the company builds capacity to service the loans after full implementation of the NBB project.

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