Leading internet services provider, Liquid Telecoms is battling to service long term loans acquired externally due to the depleting value of the local currency and an unfavorable tariff regime, 263Chat Business has gathered.
The telecoms firm also said due to depleting cash flows from a weaker tariff, it has become extremely costly to undertake recurrent systems maintenance which needs foreign currency.
The company has put massive investment into its internet infrastructure over the years financed by various debt instruments which are yet to be settled.
The reintroduction of the Zimbabwe dollar last year meant the company’s cash flow in real dollar terms massively deteriorated making it difficult to cope with external loans quoted in American dollars (USD).
“The investment we put in this infrastructure is so huge, the setting of cables and so forth and it takes time to realize profits after spending this much. There are loans that still need to be paid which we used for these projects,” Liquid Telecoms regional chief executive, Wellington Makamure told 263Chat Business on the sidelines of the company press briefing.
“That’s is why we are crying out because initially, it was a bit easy when we were still on 1:1 basis with the American dollar but now it’s very difficult. Right now we are actually defaulting on some of the loans which is so bad, not only the loans for capital expenditure, we are also failing to cope with licenses. We are constantly giving excuses that we will pay later,” he added.
Without revealing the quantum of the loans, Makamure said most of the services were contracted from global tech giants like Nokia and Huawei.
In 2017, Liquid Telecoms contracted Chinese giant, Huawei to deploy 100Gigabit wavelengths to its network across Southern Africa for its expanded broadband services.
The company now boasting of 20 000 kilometers of fibre optic system in Zimbabwe admits to grappling with servicing its long term loans acquired in setting up its infrastructure.
“You know when we were buying, most of the telecoms companies here were buying from Huawei, we were buying from Nokia, we were buying cables from international cable companies,’ he added.
Nevertheless an unfavorable tariff has also worsened matters for the telecoms giant.
“We actually have the lowest tariff in the region. The Zimbabwe dollar will buy you nothing. We are actually suffering as we are lagging behind horribly. The industry is in dire stress as I speak,”
“We have a disconnected tariff approval system and its killing us as an industry,” Makamure said.
Last year the telecoms regulator, POTRAZ set internet tariff at 19 Zimbabwean cents per megabit which is now valued at 1 US cent per megabit using the interbank rate of 1USD is equivalent to ZWL$ 18.6.
However due to high levels of inflation the tariff has been eroded in value and services providers have been calling for an upward review with lukewarm response from the regulator.