Putting Telecel closure in perspective


Telecel Zimbabwe was recently notified by the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) of the cancellation of its licence with effect from April 28 2015.

The government cites failure to pay $137,5 million for a 20-year licence, but Telecel claims to be up to date on instalments, in line with the licence renewal agreement signed on August 6 2013.

Accordingly, Telecel was granted a 30-day licence to facilitate the smooth winding down of the network in a manner that minimises disruption to subscribers. A further 60 days were granted to decommission equipment.

Though non-payment of the licence fee and failure to comply with indigenisation laws are good enough regulatory reasons to close down any mobile network operator, when all is said and done, there are still more reasons why the company’s operations should be rescued than there are reasons for it to be closed. Both the regulator and Telecel, therefore, have their work cut out for them.

Clearly, it’s not in anyone’s interests for Telecel to close shop and no one will applaud the government for assuming the role of undertaker.

It’s well and good for the government to flex its regulatory muscles if that’s what it will take in order to get Telecel to toe the line, but it should be equally easy for the government to make appropriate compromises and concessions on condition that Telecel will reciprocate through more earnest compliance initiatives.

Below are some reasons for stakeholders to pursue a solution that ensures Telecel’s survival rather than one that sends it to an early corporate grave.

Loss of employment and livelihoods If the company closes, around 1 000 workers will lose their jobs. It is a frightful time for anyone to be leaving their source of livelihood, especially under involuntary circumstances which don’t guarantee severance packages. For a government that seeks to create two million jobs under ZimAsset, if 1 000 jobs are lost the lofty target will become harder. Workers would lose out on the 11% that was due to them under the company’s proposed empowerment scheme. Not only would employees be affected, about 5 000 agents will lose their agency status, while airtime dealers and vendors will be out of work.

Loss of business for service providers
Telecel has many partners who would be affected by its closure. These include suppliers of recharge cards, marketing and promotional materials, advertising services and financial service partners, among others. According to Telecel executives, the company’s suppliers include PowerTel, a supplier of Internet services which is ironically a government-owned company.

Fiscal considerations
The government earns considerable revenue from Telecel through licence fees, interconnection fees and from tax payments contributed by the company, one of the few remaining corporate taxpayers in a dwindling pool of liquidity. Whatever it takes, the government’s role must go beyond mere collection of tax revenue to that of ensuring the survival of the companies which generate taxes — its very own lifeblood.

Loss of consumer confidence
For subscribers who use TeleCash — Telecel’s mobile money service — the closure of the company would be the equivalent of bank failure, except that in this case, it is induced by regulatory considerations rather than capitalisation or corporate governance issues. Either way, this is a difficult time for subscribers, who would most likely be inclined to withdraw their cash and keep it at home or move it to other networks.

So a “run on deposits” is unavoidable unless the pronouncements of both the government and Telecel are sufficiently reassuring in respect of the prospects of an amicable resolution of the issue. Estimates put the number of TeleCash users whose accounts hold millions of dollars at over one million. If it were possible, the long-suffering transacting public would be spared the trauma.

Disruptive fallout
It is inevitable that there will be considerable disruption to commerce, to individual lifestyles and to the general social fabric of the country if Telecel is closed for good. Although it is now the smallest network in terms of subscribers, Telecel has over the years evolved to become an important component of the telecommunications landscape.

As far as mobile money goes, TeleCash has been giving EcoCash a run for its money and its demise would kill the kind of competition which is ultimately good for subscribers.

Telecel cannot, therefore, just be wished away in 90 days without anticipating a disruptive fallout of significant proportions. TeleCash, for instance, had forged links with a number of partners such as insurance companies, banks and municipalities to whom it has been providing payment services. All these partners would now have to make alternative arrangements, with significant cost implications. So will the 2, 4 million subscribers who preferred to deal with Telecel for one reason or another.

Legal implications
If both the government and Telecel are unyielding and remain entrenched in their current positions, there could be a protracted legal battle as the latter and its global shareholders have vowed that “they are taking immediate action both locally and internationally to challenge” the cancellation of the licence.

Needless to say, such action can only be of a legal nature, but the ensuing legal wrangles would certainly be poisonous for the business environment, while potentially scaring away investors.

In terms of Section 96 of the Postal and Telecommunications Act, Telecel may, however, appeal to Information Communication Technology minister should they be aggrieved by Potraz’s decision, which they no doubt are, having duly described it as “unfair and unwarranted”. I don’t think anyone really believes that the government is hell-bent on closing Telecel down, but neither do I want to think they are just calling Telecel’s bluff. Telecel will most likely appeal and new conditions will be laid out for them. The key will be whether they will be able to meet any such conditions. If they meet them, then everyone will live happily ever after, but if they are unable to meet them, would the government still have any patience left after that?

l Feedback: omen.muza@gmail.com. Omen Muza writes in his personal capacity. You can view his LinkedIn profile at zw.linkedin.com/pub/omen-n-muza/30/641/3b8