MERGERS, ACQUISITIONS AND FINANCIAL RESULTS

Zamtel in 17m US dollars annual losses in Zambia

Government says Zamtel has an annual operational deficit of US$17 million. This is apart from the telecommunication company having liabilities of over US$125 million as at December 2008.

Minister of Communications and Transport, Geoffrey Lungwangwa said this in Parliament last week when he issued a ministerial statement on the intended partial privatisation of Zamtel. Professor Lungwangwa said Zamtel in its current form is insolvent, adding that it owes Government over K300 billion.

He said government decided to privatise Zamtel to save it from liquidation. Prof Lungwangwa said Zamtel has lost over 10,000 mobile and fixed line subscribers since 2006 due to the financial and operational challenges that the company is faced with.

He said while the two major private operators in the mobile telecommunications industry, namely, Zain and MTN have over 3.5 million subscribers between them, Zamtel has fewer than 200,000 customers.

“In spite of its monopoly status, the company has only managed to attract fewer than 100,000 fixed and fixed-wireless subscribers over the last 40 years and, indeed, since 2006, it has lost over 10,000 subscribers,” Prof Lungwangwa said.

He said the average subscriber base for sub-Saharan African telecommunication operators is 586per employee while Zamtel has only 110 subscribers per employee. Prof Lungwangwa said despite the poor subscriber numbers, the company has maintained a cost base that is out of proportion with its commercial performance.

He said in the 2007-2008 financial year, staff costs generated as a result of the company’s more than 2,500 workforce accounted for over 70 percent of revenues.

Prof Lungwangwa said as a result of its disproportionate cost base and inadequate commercial performance, Zamtel’s profitability has declined sharply.

He said in its current state, the company cannot compete favourably where other players are enjoying significant market share. “It is for this reason that a committee was set up to evaluate the financial status of the company, and the best solution they came up with was to partially privatise the company,” he said.

Prof Lungwangwa said Zambians are at liberty to participate on an equal basis with all other interested parties acquiring the 75 percent shares in Zamtel. He said the majority stake will be offered only to qualified partners who can demonstrate financial capacity and management experience to turn Zamtel into a powerful competitor in the Information Communication Technology (ICT) market.

Zambia Daily Mail

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