Powertel reduces losses but not out of danger

By Staff reporter | 11 Apr 2019 at 16:47hrs
PowerTel
As state enterprises continue to underperform, Powertel Communications which was recently unbundled from Zesa Holdings is part of the bandwagon of loss-makers.

According to a report submitted to the Parliamentary Portfolio Committee on Information, Communication Technology, Postal and Courier Services, Powertel, a state-owned Internet Access Provider(IAP), recorded a loss before tax of $360 365 as shown in their unaudited 2018 financial performance report. This is a huge reduction from the $3 million loss they suffered in 2017.

In their submission, they also had a loss reduction of $2.3 million from $4.1 million in 2017 on depreciation and amortisation. Another huge reduction is on their Earnings Before Interest and Taxes which recorded $10 650 from $3 million in the previous year. There was also half a million dollar decrease in their total operating expenses.

However, the loss by Powertel raises a lot of eyebrows as IAP revenue for 2018 had positive gains. According to the Postal and Telecommunications Regulation Authority (Potraz)Sector Performance Report Q4, (IAP) revenue increased by 13.4% to record $69.7 million from $61.6 million recorded in the third quarter. Powertel only managed to get 9% of the IAP market share revenue a percentage which is way below what their competitors amassed.

The telecommunications business now requires companies to be more capital intensive as demand soars and competition intensifies. Powertel has been struggling to cope with the demand and invest heavily in infrastructure that can turn their fortunes in terms of revenue around.

According to the report submitted before the Portfolio Committee on ICT, the IAP's loss-making trend has been continued with the heaviest loss of US$3 million having been recorded in 2017. The loss is attributable to very slow revenue growth since 2014 and increasing operating costs under the same period.

The Potraz Sector Performance Report Q4 notes that Powertel had 9% of the IAP revenue market share, a 1% decline from the previous quarter. In a sector that is becoming more competitive, any negative change on the market share revenue will have ripple effects on the balance sheet and in the case of Powertel positive gains will not be recorded any time soon based on financial performance over the past three years.

In their submission, Powertel attributed foreign currency unavailability as the main reason their quality of service has been adversely affected as some vendors have stopped providing critical maintenance due to non-payment of costs. They also need to be allocated foreign currency for infrastructure projects they are in the process of implementing, equipment maintenance and contract execution.

Zimbabwe is a landlocked country and internet service provision is costly as most IAPs have to have to get connected to fibre optic cables and wireless networks. For fibre optic cables they are both aerial and underground which means they require massive civil works for new provisions and maintenance. On wireless networks, there are base station sites which are rented and require security costs that are associated with remote sites. All this work requires foreign currency and Powertel continues to be affected by its unavailability.

The government has earmarked loss-making Zimbabwean parastatals that include telecom companies for mergers. To this end, Powertel became the first parastatal to be reformed by being unbundled from Zesa Holdings and being merged with ISPs Africom and Zarnet, a state-owned venture that the government used to buy a stake in Telecel Zimbabwe.

The merger is expected to improve the fortunes of the struggling IAP. In November last year, Powertel came up with a three-year strategic business plan which is expected to return the company to profitability by stemming the losses and growing the earnings.

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