Telecel to undergo corporate rescue

Telecel Zimbabwe, the country’s smallest mobile phone operator, is set to go under corporate rescue, a local form of bankruptcy protection due to serious financial distress.

According to a High Court application due to be filed by David Mhambare, Communication and Allied Service Workers Union of Zimbabwe secretary general, Telecel was insolvent and could be liquidated.

According to a creditors’ schedule dated 31 December 2021, creditors were owed $24 billion, translating to 98,8 percent of total liabilities. As at 31 December 2021, current assets were in the region of $90 million, against $700 million current liabilities.

“The above conditions indicate the existence of a material uncertainty that may cast significant doubt on the company’s ability to continue operating as a going concern,” said Mhambare.

“If the solvency position of Telecel does not receive prime attention, it will inevitably go under liquidation.

Workers have not been getting full salaries since January 2022 at a time benefits such as medical aid have been suspended. In 2015, there were close to 700 permanent employees, but the number has since fallen to 300, of which most of them are graduate trainees and interns who have limited skills.

Its financial challenges, which include significantly higher liabilities, have been aggravated by the impact of shareholder disputes which have been ongoing for years.

“Telecel can be saved from the brink of collapse through placing it under supervision and commencement of corporate rescue proceedings. In order to resuscitate Telecel, it is my respectful estimation that a balance sheet reconstruction would be required through implementation of a scheme of compromise.

“The majority of creditors in numbers could be paid cash while a process of converting debt into equity with foreign creditors could be considered,” said Mhambare.-busienssweekly