ZIMBABWE'S telecommunications companies have noted a sharp decline in investment levels over the last five years, resulting in the sector players battling an infrastructure gap of about US$750 million, businessdigest can reveal.
On average, the sector requires a minimum investment of US$200 million annually but the figure has drastically gone down, leaving players unable to keep up with evolving technology.
“On average, we estimate that the industry needs to invest a minimum of US$200 million annually. This investment level declined to about US$50 million annually over the last five years,” Telecommunications Operators Association of Zimbabwe (Toaz) secretariat member Roy Chimanikire told businessdigest in an exclusive interview.
“Easily, we could be dealing with an infrastructure gap of about US$750 million. Data traffic has increased by about five times since 2019. This gives you a sense of the level of investment required.
“Not only has there been an increase in the amount of data consumed, the country has increased its geographic population dispersion with new settlements being formed and a lot of new mining activity, which necessitates new coverage.”
He added: “It has been difficult to meet the emerging requirements for new connectivity areas in a depressed investment climate for the sector.
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“However, we can see that a lot has been done by government and other critical stakeholders that is changing the investment climate and making sure that the sector is able to contribute meaningfully to the vision of an upper middle-class economy by 2030.”
Chimanikire, who is Econet Wireless deputy chief executive officer, highlighted that their industry was capital intensive and once they deploy information and communication technology equipment, it typically remains functional for a period of three to seven years.
“The crucial elements of telecommunications infrastructure, mainly consisting of software and hardware, tend to last about five years. To ensure telco networks operate optimally, significant software updates are required annually, and sometimes more frequently,” he noted.
“These updates, crucial for maintaining network performance, require significant investment in foreign currency.
“Without continuous investment, most of the equipment is rendered obsolete and unable to continue to carry the network capacity requirements for which it was designed, leading to deteriorating service quality, intermittent downtimes, and poor customer experience.”
He also highlighted that telecoms firms were drowning in debt, which is believed to be over US$500 million.
He warned that if this scenario is not resolved quickly, it would obstruct future expansion and sustainability.
“Our debt consists of both trade facilities and loans from banks. While specific figures may vary among companies, rising debt levels are a big worry and contribute to the financial burden that telcoms are carrying, which will impede future growth and sustainability,” he said.
“In terms of the specific numbers, it is not information which is published by all members in the sector. However, suffice to say that our estimates indicate that it could be in the range of US$250 million to US$500 million.”
Lawrence Nkala, TelOne’s chief executive officer, recently revealed that his company is saddled with close to US$400 million in legacy debt inherited from its predecessor, the Posts and Telecommunications Corporation (PTC).
State-owned mobile network operator, NetOne, has indicated that legacy debts amounting to US$328 million continue to negatively impact on the company’s balance sheet, through heavy exchange losses.
NetOne is saddled with concessional loans from China Eximbank which were extended for network expansion phases 1, 2, and 3, as the debt now stands at US$42,8 million, US$233,6 million, and US$24,4 million respectively.
Additionally, the company's total debt to the KfW Development Bank of Germany stands at US$25,9 million, which was provided for the company’s cellular mobile system expansion. Huawei is owed US$2,2 million which was a loan drawdown deposit funding provided through ChinaExim.
Econet Wireless Zimbabwe and EcoCash Holdings last year completed a US$60,6 million rights issue, with the cash raised going to pay off five-year old debentures (loans to shareholders) that matured in April 2023.
The debentures had been issued to finance Econet's expansion more than six years ago. The debt originally amounted to US$130 million.
But an early redemption of part of the debentures left the two companies still owing US$60,6 million worth of debentures to shareholders.
Toaz comprises fixed and mobile telecommunication operators. Its current members are TelOne, Econet, NetOne and Telecel, among others.