TelOne in $25 million loss. Burdened by old PTC loans

TelOne made a loss of $24.9 million dollars in 2016, the company’s annual financial results reveal.

Announced today, the results show that the company is burdened mostly by loans from a long time ago when it was still Posts a Telecommunications Communications ( PTC ). Those loans amount to $231 million and they brought with them costs of $19.3 million in the year.

Legacy loans aside, TelOne’s lack of profitability was also caused by depreciation of its physical assets (telephone exchanges, data centers, satellite station, warehouses, copper cabling, fixed line, cars and so forth) of about $23 million.

The loss therefore can be considered in this context.

In telecoms, to understand a company’s performance, it is common to measure its annual earnings before the subtraction of interest payments (finance costs above), taxes, depreciation, and amortization. That measurement is called EBITDA. The reason is that telecoms has high levels of depreciation and financing from debts (hence the finance costs). For example, to roll out 4G companies have to borrow lots of money which brings interests costs with it. And as this happens, earlier broadband technologies already deployed are rendered irrelevant and therefore needing to be depreciated.

TelOne’s EBITDA for the year was $13.9 million. Still, this is down 26% from 2015.

Total revenues for 2016 took a 17%  knock to $114 million. TelOne is not spared the migration of users from making voice calls using mobile phones and landlines, to using apps such WhatsApp to communicate. And so far, the growth in broadband usage that this would cause is not significant yet.

A statement on the results by TelOne chairman, Eng. Shamu is hopeful of growth in broadband revenue this year, but expresses worry of the legacy debt.

While the high depreciation charge is a temporary situation as data revenues are expected to grow due to uptake in broadband services, the legacy loans remain an albatross to the company’s finances.

While TelOne is burdened by legacy loans and depreciation, the company’s is also being squeezed by local competition especially for the broadband product it is pinning its future growth on. On one side, mobile operators NetOne, Econet and Telecel are offering easy to take up low-cost internet bundles which customers can use on the go. On the other side are fixed internet providers like Dandemutande and Liquid Telecom who are competing aggressively on the price & network coverage front.