Investment in Zamtel in jeopardy as debt rises

Investment in the Zambia Telecommunication Company (Zamtel) by international telecom operators is hanging on the knife edge as the company's asset value continues depreciating and it continues to record significant loses due to operational problems.

Zamtel is up for sale but the Minister of Communications and Transport Geoffrey Lungwangwa has warned that the company's liabilities have continued to show steady increase in the last five months. The beleaguered company's debt has risen to more than US$150 million from $60 million five months ago.

Zamtel has failed to compete with regional mobile service providers including pan-African service provider Zain and MTN (Mobile Telecommunication Network).

Zamtel, which provides fixed, mobile and Internet services is at the brink of closing due to mounting losses and operational problems and the Zambian government has decided to sell it to international or regional operators or find an equity partner to save it from collapsing.

The Zambian government has for years pumped money into the company in hopes that it will be able to provide competitive telecom services, expand its services and make a profit. Zamtel also provides international gateways to private mobile service providers.

"The company was not ready to compete with other operators. We just have to find an equity partner who will run the company in a businesslike manner," Lungwangwa told lawmakers this week.

Concerned about the problems the company is facing and its looming closure, Zambian president Rupiah Banda has appointed a committee to look at ways to save Zamtel from collapsing. The committee -- which comprises the ministers of Communications and Transport; Commerce Trade and Industry; Finance and National Planning; and Energy and Water Development -- is supposed to come up with a recapitalization plan or find an equity partner to rejuvenate the company.

The Ministry of Communication and Transport has already warned that Zamtel needs more than an infusion of money and different management -- it needs a new business model if it is to survive and compete with private service providers.

One of the business plans being considered includes separating CellZ -- Zamtel's sister company, which provides mobile services -- from Zamtel. CellZ operates under Zamtel management.

In December last year, the Zambian government engaged RP Capital of the U.K to value Zamtel assets and liabilities and find a buyer of shares in the company. RP Capital is yet to submit its report to the Zambian government but in the meantime, Zamtel's asset value continues to deteriorate.

Several African governments are privatizing incumbent telecom companies after failing to recapitalize them, hoping that the new owners will roll out new plans and services including data, video conferencing and Internet backbone offerings in addition to voice services.