7 December 2012

Zimbabwe: Zelco Goes Into Voluntary Liquidation

State Owned mobile telephone network operator NetOne's former agent Zelco Cellular (Pvt) Ltd has resolved to go for voluntary liquidation after succumbing to a myriad of operational challenges.

According to a November 30 Government Gazette, the Zelco board of directors made a special resolution to liquidate the company after considering that it was no longer trading owing to working capital constraints and because there were no prospects of the shareholder injecting further funding.

"Now, therefore, it is resolved that the company be, and is hereby authorised to apply to the High Court of Zimbabwe for voluntary liquidation in terms of the provisions of the Companies Act," reads part of the announcement.

Tawanda Kanengoni of Chikumbirike and Associates was nominated as liquidator, subject to appointment by the Master of the High Court, while Dickson Munyengeri was authorised to sign all documents to give effect to the liquidation.

In May last year, NetOne cancelled its more than a decade-long agency contract with Zelco following the latter's failure to remit of US$14million in fees collected.

Under terms of the two parties' agreement, Zelco would sign up post-paid customers and collect revenue on behalf of NetOne for a fee.

Problems arose when NetOne continued using the postpaid system at the height of hyperinflation, when changing economics demanded a switch over to the pre-paid system.

When Zimbabwe changed over to the current multicurrency system, telephone bills owed by post paid customers were converted into US dollars. However, Zelco was unable to collect the US-dollar denominated debts from its contract subscribers on behalf of Net one. As of May last year, NetOne was owed in excess of US$30million by 10 000-plus postpaid clients.

The government-owned mobile operator is itself also suffering from capitalisation constraints and is thus unable to improve its service and compete on an equal footing with private operators Econet Wireless and Telecel Zimbabwe, which are the country's largest and second largest mobile networks respectively.

Earlier this year, NetOne chief executive Reward Kangai said government was committed to the company's success, and had spent around US$200 million in developing the network since 2009.

However, NetOne's capital has remained inadequate. The business is capital intensive and in need of a technical partner.

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