Mergers, Acquisitions and Financial Results

Telecoms firm TeleAccess' financial problems have deepened amid revelations that it cannot even pay its rentals.

The Daniel Shumba-owned company is being sued for failing to pay rentals for its offices at BB House where its switching equipment and staff are housed.

The owners of the building, Croco Properties, are suing TeleAccess for ZD$457 million after the troubled company defaulted on its rentals for nine months.

In papers filed at the High Court in March, Croco Properties are demanding that TeleAccess be evicted from the building immediately.

The total claim by Croco Properties could run into billions of dollars as owners are demanding that TeleAccess pays ZD2,1 million every day for unlawful occupation of the building since last November when its lease agreement was allegedly cancelled. This comes to ZD580 million and inflates the total claim to over ZD1 billion.

"In breach of the agreement defendant has failed, neglected or refused to pay the sum of ZD457 699 238 in respect of rentals and other sums due to plaintiff," says Croco Properties through their lawyers.

"Defendants' (TeleAccess) right to occupy the premises terminated on November 2 2004 but despite demand defendant has failed to vacate the property."

In its opposing papers TeleAccess has through its lawyers denied that it "refused or neglected to pay" the rentals. It argued that Croco Properties had "wrongfully" hiked rentals by 590,73% a month.

"Defendant avers that its payments of rentals and other sums due to plaintiff are up to date and further that the only reason there appears to be arrears is plaintiff's erroneous interpretation of the . lease agreement," TeleAccess says.

The lawsuit comes as the company continues to experience financial problems and risks losing its fixed network licence.

Since being granted a licence in 2003 TeleAccess has failed to launch its operations due to lack of funding. It has also failed to lure foreign investors to provide the much needed foreign currency.

According to telecommunications regulations, TeleAccess was supposed to roll out its network in June 2003 after it was granted an operating licence.

The company recently had a private placement to raise funds to import essential equipment. Sources say the private placement failed to attract sufficient numbers of institutional investors.

TeleAccess however says the placement raised the initially targeted ZD150 billion but that the offer had to be extended for another two weeks when the required amount rose to ZD210 billion due to exchange rate movements.

However, at the current exchange rate ZD210 billion can only raise USD21 million, which experts say is not enough to roll out a network to rival Tel*One. The experts say the private placement lacks the foreign currency component that is required to buy essential equipment.

Shumba has in the past claimed that his network was stuck in the mud because he does not want to raise forex on the parallel market. But last week he was dragged to court on charges of sourcing foreign currency on the black market.

Zimbabwe Independent