The Company posted significant growth in 2021 registering an inflation adjusted profit before tax and depreciation of ZWL3.2 billion up from ZWL1 billion achieved in prior year.
In historical cost terms, ZWL2.1 billion was achieved during the period up from ZWL627 million achieved in 2020. This was against a balance sheet that is weighed down by legacy loans.
These loans are hampering the sourcing of new funding to deploy low cost structure LTE and Fibre technologies to replace costly to maintain and vandalism prone copper-based technology. This is also exerting pressure on the bottom line with excessive interest and exchange losses all totalling ZWL10.5billion, in inflation adjusted terms, for the year 2021.
Revenue for the period grew by 134% in inflation adjusted-terms and 187% in historical terms, driven by a 5% volume growth in broadband subscribers and tariff adjustments of 56% for Voice and 38.5% for Home broadband, which tariffs were effected in September 2021.
The Company achieved a 220% increase in EBITDA from ZW$1billion in 2020 to ZW$3.2billion in 2021.
Operating expenses increased by 112% from ZWL3.3billion in 2020 to ZWL7billion in 2021 in inflation adjusted terms. This was mainly driven by the depreciation of the local currency which had a pass-through effect on inflation as most of the Company’s suppliers link their prices to negative movements in the foreign exchange rate on the alternative exchange rate market.
In response, the Company continued to implement cost containment measures during the year, with specific investments in the deployment of low cost structure LTE network to replace the copper network. The replacement of a costly vehicle fleet was among other key cost containment initiatives undertaken during the year.
TelOne ended the year under review with a net liability position of ZWL18.6billion (historic) and ZWL593million (inflation adjusted). Please refer to our full report for measures that the Company is seized with in restructuring the balance sheet so as to move to a more attractive position.
The Company is faced with acute viability challenges due to the prevailing hyper-inflation against a tightly controlled tariff.
The cost of importation and distribution of 1 Mbps is US$28, however, TelOne is unsustainably distributing the same unit at US$10 as the Company has been unable to get a tariff review.
The last tariff review was in September 2021. When measured against the movements in exchange rates, for voice products the effective price was US$0.07cents per minute after the tariff increase and it deteriorated by 19.3% to US$0.058 cents per minute by 31 December 2021.
As at the date of publishing of this report, no tariff adjustments had been approved for 2022. Consequently, the effective price for voice and broadband has fallen to an unsustainable US$0.025cents per minute and US$0.00050 cents per megabyte, respectively, as of 31 May 2022.
Meanwhile, the Company’s total costs have ballooned by 107% to ZWL1.8 billion per month up from ZWL856 million per month. While this has been due to the general price increases in the market, the movements in the cost of fuel and power have had significant impact on the overall cost structure.
Diesel price in US$ terms surged 31% from US$1.34 in September 2021 when our tariff was reviewed to the prevailing price of US$1.76. This together with the 200% upward power tariff adjustment have further put the Company’s viability status into the negative – Harare