TELECOMMUNICATION firm, NetOne Private Limited has been revealed to be technically insolvent and runs the risk of being unable to continue operating, a new report shows.
In a report released last Friday, acting Auditor-General (AG) Rheah Kujinga said the firm’s total liabilities exceeded the total assets by ZWL$32 billion in 2022.
“The company’s total liabilities exceeded the total assets by ZWL$32 billion, while the current liabilities exceeded the current assets by ZWL$20,9 billion (2021: ZWL$20,5 billion),” Kujinga said.
“These conditions indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. My opinion was not modified in respect of this matter.”
Typically, a company’s inability to continue as a going concern means that there are significant concerns about whether it can continue operating and meet its obligations for the foreseeable future.
While this is typically defined for at least the next 12 months, which for NetOne would be last year, the firm has been losing active subscribers which could indicate some vulnerabilities.
In the first quarter of 2024 the firm recorded a 5,52% dip in active subscribers to 4 017 167 from the previous quarter.
The Postal and Telecommunications Regulatory Authority of Zimbabwe reported that NetOne’s market share contracted by 6,66 percentage points to 11,84% in the first quarter from the fourth last year.
Kujinga said its liabilities exceeding assets caused the firm to post a loss of ZWL$40 billion for the financial year ended December 31, 2022, widening its loss making position from ZWL$31 billion.
Mobile operators say they are unable to charge cost reflective tariffs to raise money to pay their suppliers for maintenance services fees that are only in foreign currency.
Kujinga said part of NetOne’s woes included its lack of control over debt.
“The company’s control over debt management was not effective during the period under review,” she said.
“Post-paid customer accounts with outstanding balances were not suspended 90 days after barring of outgoing calls. This was contrary to the company’s debt management policy, which requires suspension of services 90 days after barring of outgoing calls.”
She said an adverse opinion was issued owing to the forex conversions used for the year December 31, 2021, which also affected the firm’s financial reporting for 2022.
“The company did not restate the prior year financial statements in accordance with International Accounting Standard (IAS) 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ as at December 31, 2022,” Kujinga said.
“As a result, my opinion on the current year financial statements is modified because of the possible residual effects of the non-compliance with IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ and the comparability of the current period’s figures to that of the comparative period. The effects of this non-compliance was considered material but not pervasive to the financial statements.”
In responseto the audit findings, NetOne committed to address unaccounted cash deposits into its accounts and upgrade its software to better capture performance as well as data.
