TelOne records 125pc untaxed profit

Source: TelOne records 125pc untaxed profit | The Herald July 1, 2019

TelOne records 125pc untaxed profit

Golden Sibanda and Africa Moyo
FIXED telecoms giant, TelOne, extended its streak as one of only a few shining beacons among usually poor performing State owned enterprises after untaxed profit jumped 125 percent to $1 million in the first 5 months of 2019.

The state telecoms services provider said the strong showing in the five months to May 2019 built on similarly strong performance last year when it managed to break-even despite being weighed down by onerous legacy loan finance charges and statutory obligations penalty.

This marked departure from the culture of most state entities, which saw 38 out of 93 SOEs audited in 2017 incurring a combined US$270 million loss, as weak corporate governance practices and ineffective management control mechanisms took their toll.

But TelOne made profit after earnings before interest and tax (EBIT) profit in the first five months of 2019, following $4,2 million loss in the same period last year, built on a strong 62 percent jump in revenue to $79 million.

Overall, top line revenue growth benefited from sterling broadband performance that saw revenue grow 51 percent compared to 43 percent in 2017. The broadband growth was anchored on strong subscriber increase to 112 356 over the period under review.

In fact, the State telecoms company’s fixed data subscriber base grew from 87 851 in 2017 to just over 100 000, which is an increase of 14 percent.

TelOne said its tariffs remained the most affordable on the market even after an adjustment of 150 percent that was effected in line with the changes in the interbank foreign currency system. This, it said, however remained below market trends, which averaged 500 percent.

Going forward, TelOne said it had adopted a new strategic thrust that saw the company adopting a technology, media and telecommunications (TMT) model, offering digital solutions and products.

“Having completed the five years of the transformational strategy which was largely anchored on technology modernisation and expansion, TelOne’s strategic thrust for the period 2019-2023 has shifted to digital innovation services and products,” TelOne said.

The new strategy will focus on three key pillars  – revenue growth, profitability and sustainability, as the first – transformation into a value added services TMT company; being the second and digital Solutions customer experience enhancement, as the last of the pillars.

In the year to December last year and despite inflation induced increases in operating costs, TelOne’s performance at EBITDA level improved by 21 percent from $19 million in 2017 to $23 million in 2018.

“Despite the inflationary pressures experienced in 2018 at 42 percent, the company managed to contain operating costs seeing an increase of just 2 percent from $84 million to $86 million,” TelOne said.

The State owned fixed telecoms firm turned around from a $10 million loss in 2017 to reach break-even point, excluding the negative loss effect of $US12,4 million finance charges on legacy loans and US$8,9 million Zimra late tax obligations payments penalty.

This growth was on the back of a 5 percent increase in revenue for the financial year to December 2018 owing to a 37 percent upsurge in broadband revenue. Total revenue grew to $125 million in 2018 from the $119 million achieved in same period in prior year.

TelOne’s broadband revenue grew to reach $61,1 million from $45 million in 2017. Since the beginning of the implementation of the national broadband project in 2016, the company said it witnessed an 85 percent cumulative growth in data revenue resulting for the first time, in the off-setting of voice revenue loss by gain in data revenue, a direct result of the business’ transformation strategy.

TelOne board chair Juliet Machoba, told the firm’s recent annual meeting that 2019 will be challenging as foreign currency challenges and inflationary pressures in the country become more pronounced.

The company said it expects to set rolling its privatisation plans this year in line with Government plans to restructure, commercialise, assimilate and dispose of some of the State owned companies.

“Despite these challenges, TelOne is looking forward to leveraging on Government’s digitalisation drive and e-government initiatives which are aligned to the Company’s strategic thrust for the next 5 years,” she said.

“Partial privatisation plans are expected to gather momentum in 2019 and this is expected to create room for the company to attract a suitable strategic partner.

“The potential investor is expected to have the following; a strong capital and financial base, ability to deliver technology, skills transfer, a global network with clear marketing strengths ability to mobilise lines of credit on a continuous basis and possession of vision congruencies.