TelOne moves to ring-fence US$427m legacy debt to unlock growth

CLOUDINE MATOLA

State-owned telecommunications operator TelOne (Private) Limited is seeking shareholder and government approval to warehouse US$427m in inherited debt as part of a broader strategy to clean up its balance sheet, unlock new funding and strengthen its competitiveness, Business Times can report.

Speaking at the company’s annual general meeting in Harare last week, TelOne chief executive officer, Engineer Lawrence Nkala, said the legacy debt has become a major impediment to the company’s growth, limiting its ability to raise fresh capital for infrastructure expansion and digital transformation.

He said TelOne was appealing to its shareholder, Mutapa Investment Fund, and the government to ring-fence the debt and allow the business to operate with a clean balance sheet.

“We are asking the shareholders, Mutapa together with the government, to assist this institution. If it is to compete equally with the rest of the world, US$427m is what we are asking the shareholder to warehouse and allow this entity to have a clean balance sheet,” Nkala said.

The proposed debt warehousing initiative is intended to isolate inherited liabilities from the company’s operating business, enabling TelOne to leverage its asset base more effectively and secure affordable long-term financing.

“To unlock growth potential, TelOne, together with its shareholder, is advancing a debt warehousing strategy. This approach seeks to restructure and ring-fence inherited obligations. By isolating the debt burden, TelOne aims to fully leverage its net asset position, creating a more sustainable financial foundation that will enable access to affordable capital for infrastructure expansion, innovation and long-term competitiveness,” Nkala said.

He said the debt burden has continued to constrain the company’s ability to secure fresh financing, delaying critical investments in network modernisation and digital transformation.

“The debt remains a major constraint, limiting TelOne’s ability to secure new funding and slowing down critical modernisation and digital transformation initiatives,” he said.

Beyond its legacy debt, TelOne is also grappling with mounting unpaid bills owed by government institutions, a situation Nkala said is placing severe strain on the company’s day-to-day operations.

According to the telecommunications operator, government currently owes the company approximately US$42.8m and ZWG1.2bn, with the amount continuing to grow.

Nkala said even partial settlement of the outstanding obligations would significantly improve the company’s liquidity position and enable it to meet critical statutory and operational commitments.

“The payment of US$42.8m and ZiG1.2 bn is a big cry for this institution. To at least get even 10% or 50% of anything can really help this entity. We have obligations with the pension fund, the regulator and the tax authorities. These are major issues.

“When workers see us, they say you are not paying our pensions, our salaries are very low. But I can only pay from what I have in the bank. I can’t pay what I don’t have. This is part of the problem. We are really encumbered in our operations by the failure by government to pay what is due.

“Currently we are owed close to US$42m and ZWG1.2bn, and the amount continues to increase. We want to be capacitated in that area,” he said.

Despite the financial constraints, TelOne continued investing in strategic growth initiatives during 2025.

The company invested US$7.6m, with a significant portion channelled towards expanding its fixed wireless access and fibre broadband infrastructure.

It also launched TelOne Connect Voice, a new service aimed at improving accessibility and convenience for customers.

The company’s strategic partnership with Starlink also delivered strong returns, with revenue generated from the satellite internet service rising sharply to US$3.7m in 2025 from US$215,000 recorded in 2024.

“The business fully realised value out of its strategic partnership with Starlink satellite service, recording revenue to the tune of US$3.7m in 2025, up from US$215,000 in 2024. This performance was achieved alongside continued improvements in customer experience, reflected in enhanced service quality and customer satisfaction levels during the year,” the company said.

However, TelOne acknowledged that liquidity constraints continued to weigh heavily on its operations throughout 2025, placing structural pressure on working capital while limiting its capacity to finance capital expenditure and accelerate network expansion.

The company believes that resolving the legacy debt challenge, together with improved settlement of government obligations, will position it to attract affordable financing, accelerate infrastructure development and compete more effectively in Zimbabwe’s rapidly evolving telecommunications sector.