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Telone's 'Turnaround Agent MD Wellington Makamure on "Living On The Edge"
Balancing  Act's News Update 255
May 01, 2005

TeleOne is due to announce its first expansion plan in two years. Its Managing Director Wellington Makamure was appointed as a 'turnaround agent' for the company. He tells News Update what it's like "living on the edge" and what he's planning to do to bring the company back into financial health again.

When did you start at TelOne?
I joined 1 June last year. Previously I was working for Phillips in Zimbabwe.

How many fixed lines?
There’s slightly over 300,000 but that’s been stagnant for some while. Our challenge is infrastructure development. In the rural areas, 90% of our exchanges are analog. However in Matabeleland, Harare and Midlands we’re highly digitalised but another problem is that we have old digital technology elsewhere. There’s been no new investment since the early 1990s. The biggest problem for us in Zimbabwe has been the lack of foreign currency. All operators are over-subscribed and the quality of service is compromised. (see story in Telecoms News)

Since I joined, I’ve been looking at CDMA-based, wireless local loop with Huawei from China. We should have started implementing in October last year but we havn’t been able to raise the 15% forex deposit to start the contract. The Reserve Bank is now saying that I can get the amount required in April.

What CDMA will do is provide high-speed internet places like schools and clinics and hopefully we’ll start implementing it in June. We could have as many as 80,000 new subscribers in the rural areas.

How many mobile subscribers are there?
We were originally called PTC. This was then commercialised and two companies came out of it. NetOne is the mobile company. The Government owns both of us but we are run separately. The other two mobile operators are Econet and Telecel. There’s somewhere between 300,000-350,000 subscribers in total but overall demand probably exceeds one million. But again there is a forex problem in terms of expanding capacity.

What international bandwidth have you got?
We’ve upgraded our Harare-Beit Bridge link through Gweru (where we’ve got our international switch) to an SDH radio link. The next project on the cards will be to replace it with fibre. We also have the Mazoe earth station where we get satellite connectivity from Intelsat.

Are there other infrastructure providers?
There’s Powertel which is a subsidiary of the state power utility and it’s got a data licence. We don’t want to duplicate what Powertel is doing. We are also talking to Telkom about getting access to SAT3 and are discussing the problem of access prices.

In addition, we’re looking at the possibility of joining the East African fibre project EASSy but again there is a difficulty with available FOREX.

Is there a grey market?
I think so. I want to try and detect this with outside help. There’s a lot of refilling of traffic which is illegal in Zimbabwe. We can’t detect this on analog exchanges.

We operate two VoIP gateways ourselves, one provided by iBasis and the other by Teleglobe. There’s not a lot of traffic going over these gateways.

Why not?
Telkom SA financed the Harare-Beit Bridge link and so (in order to make the loan payments) we have to commit most of our minutes to that link.

What are the main links to other countries?
We’ve fibre through to Chirundu in Zambia and there are radio links to most of the other countries.

Will TelOne be privatised?
I don’t think so in the immediate term. What the Government has said to me is turn it around. I’m a turnaround agent.

How many employees have you got?
3900. We’re looking at retrenching 1600 of these and already begun the "right-sizing" process. The Government is 100% behind this process.

What other elements are there in the process of turning around the business?
The CDMA roll-out and infrastructure building will give us new customers and increased transmission capacity. And along with staffing costs, we’re going to address the overhead costs.

Also infrastructure should be foreign currency denominated as everything is bought in US dollars.

Will you be changing your pricing strategy?
It’s something I’d really like to do. The current TelOne pricing structure is too low. I would like to maintain our international prices but raise local prices. A local call in Zimbabwe costs ZWD200 (not even a US cent). We currently have the lowest domestic prices in the region and the need a small increase to match others.

How do you raise capital?
We have to raise it on our own, either in the form of loans or credit from suppliers. You look at the balance sheet and you can see that you have a limit. As long as my traffic is so low, I don’t have much ability to raise capital.

But we also don’t want to fuel inflation by raising prices too much which would hit our potential customers. Therefore it becomes costly to get foreign currency.

I’m living on the edge. I have to meet payments every month to people like Intelsat and BT. Currently I can’t terminate on one BT Mobile because they’ve cut us off. Most suppliers now want us to pay up front.

It’s the most challenging job I’ve ever had. You have to balance so many things. The workforce is unsure (because of the "right-sizing" process) so I have to assure those who will remain they have a future.

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