Telone Stands To Lose Stake In A Critical Foreign Company

Telone is another telecoms service provider that’s struggling to pay up its foreign dues because of foreign currency shortages. This time the repercussions of failing to meet its foreign obligations won’t only be service disruption but it will also lose its stake in West Indian Ocean Cable Company (WIOCC), a very critical supplier.

Operating exclusively as a wholesaler, WIOCC provides high capacity connectivity to African and international telcos, Over-The-Top services, content providers and internet service providers within and out of Africa. Along with the other 13 telcos, Telone is a shareholder in WIOCC. It is due to the $10 million it owes to WIOCC that Telone stands to lose its shareholding. Telone’s Managing Director, Chipo Mtasa said:

On WIOCC, definitely our shareholding is at risk. We have had different threats that have come through. And these are issues that we have alerted our authorities. We actually risk losing the shareholding if we don’t service the debt

Telone has been able to provide competitive internet connectivity (and set up data centres) countrywide owing to the bandwidth connectivity provided by WIOCC so losing its shareholding will evidently affect its operations and ultimately its customers. Above all, service disruption will heavily affect Telone itself since internet is increasingly becoming its cash cow. For customers, they will only incur the cost of switching over to another service provider.

What’s Telone doing about it?

Just like Econet, Telone is turning to the Reserve Bank of Zimbabwe (RBZ) to bankroll it with some forex. As Chipo Musa put it:

We are currently engaging the Reserve Bank of Zimbabwe to see if we can get a workable payment plan

There is a risk that if the RBZ helps (in any way) Telone, it will only breed a moral hazard in the industry- -other telcos and internet service providers won’t be diligent in managing their forex inflows and outflows just because they know RBZ will be there to cover for them. So if RBZ has the money, it will still face a predicament of deciding who to bankroll and who to ignore. Food for thought: Are Telone And Econet Too-Big-To-Default such that their poor or inadequate service will badly affect the telecommunications of the whole country? If they are (I believe they are) then RBZ has to bankroll them.

Furthermore, Telone is banking on a deal that will generate the state-owned telco $3 million which will be used to pay the WIOCC debt. Chipo Mtasa went on to say:

Right now in Bulawayo we actually stitching up a US$3 million deal and once that is signed, it is one area where we are actually going to reduce our indebtedness from US$10 million to US$7 million.

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