Zambia starts the hunt for international operator to invest in Zamtel

Telecom sector woes reflect those of other countries in Africa

Three years after Zambia repossessed incumbent operator Zamtel from Libya’s LapGreen Networks, the Zambian government has started hunting for an international operator to invest in the company.

Zamtel, like many other incumbent operators in Africa, is losing money. Last month, the Zambian government said Zamtel needs US$300 million for it to become viable, but that it doesn’t have the money to recapitalize the company. This has forced the Zambian government to start the hunt for an international telecom company to invest in Zamtel in order to save it from closing.

The problems facing Zamtel underlines the difficulties that other African governments have in keeping incumbent operators in business. Zamtel was sold to LapGreen Networks in 2010 for US$257 million by the previous administration. In 2012 however, the current Zambian administration repossessed Zamtel from the Libyans, on grounds that the company was illegally sold by the previous administration. It accused the prior government of corruption in a range of deals, including the sale of Zamtel.

But minister of Communications and Transport, Yamfwa Mukanga, has revealed that the Zambian government is once again hunting for an international telecom operator to invest in the company. Mukanga said government red tape has prevented Zamtel from competing against private operators in the sector, including South Africa’s MTN and India’s Bharti Airtel.

“We want to bring another investor on board to assist us run and improve the operations of Zamtel because currently, Zamtel is making loses and not in good shape financially,” said Mukanga in an interview this week.

Zamtel is the number-three operator in the country. MTN is currently Zambia’s largest telecom operator with 51 percent market share, followed by Airtel.

In Zimbabwe, the situation is not different from that of Zamtel. The Zimbabwean government is also facing difficulties in running NetOne profitably in the face of stiff competition from private operators who are technologically advanced and have sufficient cash to invest.

In a bid to improve the operations of NetOne, the Zimbabwean government is sacking almost the entire management at the company, accusing it of incompetence. The Zimbabwean government claims in has invested US$500 million in the company to date.

Zimbabwe’s minister of ICT, Supa Mandiwanzira, said NetOne has relied too much on government funding.

Edith Mwale, telecom analyst at Africa Center for ICT Development said it is difficult for incumbent operators to make a profit because most government officials are using their services without paying for them.

“A good example is Zambia and Zimbabwe. The Zimbabwean government owes NetOne over US$10 million while the Zambian government owes Zamtel about US$4 million. This money has to be paid for these companies to be viable,” said Mwale via phone.

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