Mergers, Acquisitions and Financial Results

The stalled second fixed telephone network, TeleAccess, precariously hangs in the balance as it emerged that its financiers, who have since doled out USD147 billion, no longer have the financial wherewithal to proceed with the project, which has been on the cards for the past four years.

Highly placed sources told The Financial Gazette this week that the latest revelations have put the band of TeleAccess backers in a quandary, as they now face the tricky option of either having their licence cancelled or convincing the authorities to wait a little longer.

It has since emerged that only political intervention can save the Daniel Shumba-owned TeleAcess from losing the lucrative licence, controversially awarded by the government four years ago without going to tender.

The fresh twist to the project might spill into another legal wrangle, similar to one that rocked the mobile telecommunications sector in the late 1990s, when Econet Wireless, fronted by Strive Masiyiwa, sensationally defeated the government in court to land the country's second cellular licence.

Telecommunications sources told The Financial Gazette last week that evidence presented to the Parliamentary Portfolio Committee on Transport and Communications, which is probing delays surrounding the rollout of the terrestrial telephony project, pointed to a bleak future.

Although the committee is yet to gather evidence from the Postal and Telecommunications Regulatory Authority of Zimbabwe and the Telecommunications Ministry, evidence received so far indicates that the firm was "unlikely to operate in any foreseeable future and hence other players should be brought in" through a re-tender.

The company's financiers, who have been bankrolling the project since 2002, indicated to the committee they would no longer continue to pump funds into TeleAcess "until a tangible financial deal is worked out with a Chinese firm to bankroll the project at US$160 million". It, however, also emerged that the Chinese would have to look elsewhere for the funds.

Other prospective players in the fixed telephone network industry have also criticised the TeleAcess project to the probe team, proposing that the licence be withdrawn and other players be allowed to participate in the country's long-awaited second fixed telephone network.

"Apart from lack of funds to finance the project, what is also coming out clear is that with only a licence for a voice service, it is next to impossible for TeleAcess to run the venture profitably," said a telecommunications source privy to the latest goings-on surrounding the project.

"You need a combination of data, Internet and voice services to run a profitable venture. It is then easy for financiers to chip in if the project licence has these three aspects. So the long and short of it is the TeleAcess venture is bleak. Only a political decision can save it from collapse," added the source.

According to the evidence presented by the bankers, the project urgently needs USD160 million, about Z$1 trillion using the auction exchange rate of Z$5 600 against the greenback.

When the firm was given the licence four years ago, it indicated it needed $8 billion to effectively implement the project. It is understood the bank has pumped in about $147 billion into TeleAccess since 2002.

The parliamentary committee is also said to have been made aware of some glaring technical and financial shortcomings of TeleAccess.

The same sources said it was apparent to the parliamentary committee that the firm lacked independent resources to bankroll the massive project as its assets had been surrendered to bankers as security.

Silas Mangono, the Masvingo central legislator who is the chairman of the Parliamentary Portfolio Committee on Transport and Communications, yesterday declined to discuss the TeleAccess probe, saying the matter was still under investigation.

"I am not allowed to grant interviews or comment on parliamentary issues under probe. Wait until we finish the investigations and have presented our recommendations to Parliament," said Mangono.

The Financial Gazette