WE ARE A COMPANY...introduction of prepaid billing to give clients control over their bills while...
Transcript of WE ARE A COMPANY...introduction of prepaid billing to give clients control over their bills while...
HALL DIRECTIONAL BRANDING
TAKE CONTROL
OF YOUR BILL
WITH PREPAID VOICE
RECHARGE CARDS
VISIT: selfservice.telone.co.zw
For SELF SERVICE
SUSTAINABILITY REPORT
WE ARE A COMPANY ABOUT PEOPLE
For the year ended 31 December 2017
ContentsOVERVIEW
Introduction 2Aboutthisreport 3Strategicfoundations 4Howweareorganised 5
GOVERNANCE
Chairman'sstatement 14ManagingDirector'sreport 16CorporateGovernancereport 20
SUSTAINABILITY
Ourstrategy 30Responsibilitytoourcustomers 32Responsibilitytoourshareholder 36Responsibilitytooureconomy 37Responsibilitytoourcommunityandenvironment 39Responsibilitytoouremployees 42Ourperformancesummaryasasustainableandresponsiblebusiness 44Riskreport 45
FINANCIAL PERFORMANCE
Director'sresponsibilitystatement 55IndependentAuditor'sreport 56Annualfinancialstatements 60
ANNEXURES
Generalcorporateinformation 84Glossaryofterms 85
Overtheyears,TelOnehasmadeconsiderableprogressinredefiningthebusinesstobecenteredonpeople.Wehave taken active and systematic responsibility to our Customers, Shareholder, Economy, Community and theEnvironmentandourEmployees.Ourstrategyhasbeendrivenbytherealisationthatthebusinessisaboutpeopleandourrelevanceintheirlives.
Forus,beingaboutpeoplemeans:
• We care about our customers, creating memorable experiences and giving value for their money.
• We care about creating value for our shareholder who remains committed to investing and supporting our programmes.
• We care about our impact on the economy of Zimbabwe and we seek to contribute positively at all times.
• We are concerned about the community to which we belong as a corporate citizen and we shall continue to play our role in its development.
• We care about the impact of our operations on the environment and we continuously seek to improve our role in environment awareness.
• We are concerned about the wellbeing of our employees and their families and we seek to uplift them in every sphere of their lives.
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
WearepleasedtopresenttheTelOne(Private)LimitedSustainabilityReportfortheyearended31December2017.
AtTelOne,wearecommittedtoadapttotheeverchangingbusinessenvironmentdrivenbymarketneedsandthoseofthecommunitiesaroundus.Wecontinuetoevolve,transformingourcapabilitiestobecomingaconvergedmultimediacommunicationservicesprovider.
ThisreportcoversallofTelOneoperationsinZimbabwe.
Reporting frameworksTheannualfinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)andtherequirementsoftheCompaniesAct(Chapter24:03).Inreportingonnon-financialinformation,theCompanyismainlyguidedbythefollowing:
- TheGlobalReportingInitiatives(GRI)GuidelinesonSustainabilityReporting
- TheCodeofCorporateGovernanceinZimbabwe(ZIMCODE)
- ThePublicFinanceManagementAct(Chapter22:19)
Assurance on financial and non-financial informationOur financial statementswere audited by theOffice of the Auditor General of Zimbabwe in accordancewithInternationalStandardsofAuditing(ISA).Theindependentauditors’reportonthefinancialstatementsiscontainedonPage56oftheSustainabilityReport.SelectedsustainabilityperformanceindicatorswereindependentlyassuredbyTelOne’sinternalauditdepartmentthroughaninternalauditreviewtoprovidereasonableassuranceonournon-financialinformationdisclosedtoourstakeholders.
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
OUR MISSION
OUR VISION
OUR VALUES
Toprovidemulti-mediaandtelecommunicationservices
Connectivityforeveryone,everywhereinZimbabweby2020
Client focus
Ourclientsarethecenterofourexistenceandwedeliversuperiorcustomerserviceatalltimes
Innovation
Wepromoteacultureofcreativityandinnovationtocontinuouslyimproveourproductandserviceoffering
Commitment
Wearededicatedtodeliveringvaluetoallstakeholders
Accountability
Weareaccountableforouractionswhichwillremaincompliant,professionalandreliable
Teamwork
Wecomplementeachother’seffortsindeliveringsuperiorcustomerservice
Excellence
Westrivetocontinuouslyimproveourselvesinlinewithchangingdevelopmentsinthesector
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Wehave three customer facing linesof businessnamelyTelOne Infrastructure and Wholesale, TelOne Retailand the TelOne Centre for Learning. These divisionswere created in 2016 to allow the business to increaseefficiencies between our technical and customer facingstaffaswell as introducing commercial drive throughoutthe business. The Infrastructure and Wholesale divisionhas allowed increased focus on the development of ournetwork while driving wholesale revenues derived frominternet service providers and other telecommunicationcompaniesinZimbabwe.TheRetaildivisionisresponsiblefor lastmile connectivity service to all customers acrossthecountrycoveringallenterprisesandhouseholds.TheCentreforLearninghasbecomeahubforthedevelopmentof technical and commercial skills for the industry inZimbabwe.
TelOne Infrastructure and Wholesale Division
TelOne’s Infrastructure and Wholesale Division isZimbabwe’s largest provider of bulk Internet; anInternet Access Provider (IAP) offering services totelecommunications operators and internet serviceproviders(ISPs).
TelOneWholesaleoffersthemostaffordableandreliablevoice,broadbandanddata transferservice leveragingonpartnerships with regional and international operators.It is able to deliver high speed Internet bandwidthwith
sufficientcapacitytocaterforZimbabwe’srequirementsatthe lowestprices in thecountry.Theshareholding in theWest IndianOceanCableCompany(WIOCC)hasresultedinTelOnebeingtheonlyZimbabweanoperatorwithdirectownershipofanunderseacable.WIOCCalsohasamajoritystake in the major submarine communications cablecompany, East African Submarine System (EASSy) cableandaninterestinWestAfricaCableSystem(WACS).Thesecablecompaniesoperatefrombothsidesofthecontinentand linkAfrica to the restof theworld. Thedivisionhasdeployed backbone optic fibre across the country withfibrecoverage increasing to3,700kilometres from2,600kilometresin2016.
TheTelOneInfrastructureandWholesaleDivisionunveiledatier3DataCentreinMarch2017.TheDataCentrecatersfor Corporates, Government and SMEs for data storageand back-up services. Another similar facility is nearingcompletioninZimbabwe’ssecondlargestcityofBulawayo.
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Existing Backbone Network
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GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
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TelOne Retail DivisionTheRetaildivisionservicestheenterprisemarketandalsooffersseveralconsumerproducts.
Enterprisesolutions
Voice TelOneoffersthemostaffordableandreliablevoiceservicewith tariffs as low as $0.05 perminute. TelOne Retail isnowofferingVoIPservicesforcorporateclientswhichhashelpedtofurtherreducetheiroperatingcosts.WithTelOneVoIP,corporateshavebeenabletoenjoyfreeonnetworkminuteswithreliableconnectivity.TheNationalBackboneProject (NBB) which was largely implemented in 2017,has ushered in new system capabilities that include theintroductionofprepaidbillingtogiveclientscontrolovertheirbillswhilealsoincreasingthecompany’scollections.
Voice over Internet Protocol (VoIP) is a technology thatallowsyoutomakevoicecallsusingabroadbandInternetconnectioninsteadofaregularcopperphoneline.AVoIPphonesystemconnectstoyourLocalAreaNetwork(LAN)andusesitasthebackboneofyoursystem.VoIPservicesenablesonetomakecallsandconnect through Internet.The service canallowyou tomakea call directly fromacomputer, a special VoIP phone, or a traditional phoneconnected to a special adapter. It enables calling to anytelephonenumber-includinglocal,longdistance,mobileandinternationalnumbers.
What’s unique about TelOne VoIP • Unlike other service providers who use unsecure
internetconnectionsandcannotguaranteequalityofservicetotransmitVoIPtraffic,TelOneutilisessecureVPNtoconnectbetweenremotesitesatnocost.
• ThechargesforthisVPNisfixedmonthlyanddoesnotfluctuatewhilewithotherproviders,subscribersarecharged fordata trafficconsumedtogetherwith theactualvoiceusage,hencetheyarebilledforbothDataandVoiceforasinglecall.
• TelOne VPN connections are encrypted hence evenifvoicetrafficisintercepted,itcannotbeinterpretedguaranteeingmaximumsecuritytosubscribers.
Virtual Private NetworkVirtualPrivateNetwork(VPN)isatechnologythatcreatesanencryptedconnectionovera lesssecurenetworkandensurestheappropriatelevelofsecuritytotheconnectedsystemswhentheunderlyingnetworkinfrastructurealonecannotprovideit.TelOneoffersdatatransferservicesthatenablereal-timeinformationtransferathighspeedsandusesvariousmediaincludingfibreopticsandVSAT.
Virtual Private Network Setup
HEAD OFFICE
REGIONAL OFFICE
REGIONAL OFFICE
REMOTE / ROAMING USERS
ENCRYPTED INTERNET CONNECTION
IP PBX TelOnealsooffersend-to-endsolutionsincludingprovidingCustomerPremiseEquipmentlikehandsets,IPPBX,PABXas well as Local Area Networking (LAN). Corporates cannowtakeadvantageofthisserviceofferingtoreducetheircommunication expenditure in the face of constrainedresources.AnIPPBXisaprivatebranchexchange(telephoneswitchingsystemwithinanenterprise)thatswitchescallsbetweenVoIP.MultipleIPPBXcanbedeployedatmultiplesitesandconnectedviaVPN.AnIPPBXcanalsoswitchcallsbetweenaVoIPuserandatraditionaltelephoneuser,orbetweentwotraditionaltelephoneusersinthesamewaythataconventionalPBXdoes.Anadditionaladvantage isthatIPPBXhastheabilitytodefineusagelimitsbasedonuserroleswithasimpleadministrationinterface.Itoffersrealtimemonitoringofcallsincludingadetailedreportofvoiceusagebyextension.Italsocomeswithvalueaddedservices.
Conferencing FacilitiesTelOne offers conferencing facilities for voice, video anddataservices.
Video ConferencingUtilising telecommunicationsofaudioandvideotobringpeopleatdifferentsitestogetherforameeting.Thiscanbeassimpleasaconversationbetweentwopeopleinprivateoffices(point-to-point)orinvolveseveralsites(multi-point)withmorethanonepersoninlargeroomsatdifferentsites.The customer requires Video Terminal equipmentwhichwillberegisteredtotheIMSVideoConferenceBridge.Thebridgeallowsmultipointvideoconferencing.
Data ConferencingAlso known as e-Conferencing, this is a solution thatintegratesmultipleconferencemethods likeaudio,videoanddata collaboration. It ismainlyused to conveneandmanageremoteconferences.Itcanbefurtherextendedtoareassuchastrainingandremotepresentation.
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Webmail Hosting TelOne hosts Microsoft Exchange email mainly forcorporate use. This allows customers to have domainnames.Keyfeaturesforthisserviceinclude:• Robustanti-virusandfirewalls• Reliablebackupserversandbandwidthroutes• Customised services and highly skilled specialised
cloudservicesexperts.• Improveduptimeandavailability• Optimum network performance with our 24/7 Call
CentreCustomerSupport
Our Satellite servicemainly caters for clientswho are inareas that cannot be accessed by our Fixed Broadbandservices especially rural and farming areas. TelOneSatellite has been providing connectivity especially toNon-Governmental Organisations operating in areaswithnocopperorfibrenetwork,ruralschoolsandclinicsand hospitals. Some rural schools have benefited fromthe availability of this service under the GovernmentConnected Schools programme where special tariffs arebeingoffered.TheKaBandbroadbandservicehasgainedpopularityamongschoolsandpriceshavebeenreviewedtocaterforthismarket.
Anewpackagehasbeenunveiledtothemarketandthisoffers double the speeds which customers were gettingon theoldpackages.Thedownloadcapshavealsobeenincreasedinordertopromotemorebundlerenewalsandoutofbundletopupsduringamonthperiod.
ConsumerProducts
TelOne offers consumer products under three broadcategoriesnamely:• Broadband-offeredthroughavarietyoftechnologies
which includefibretothehome,ADSL,SatelliteandPublicWifi
• Voice -offered throughVoiceover InternetProtocol(VoIP)andtraditionalvoicelines.
TelOne contributes 20% of the Broadband access inZimbabwe.Ofthe3,2millionhouseholdsinZimbabweourinfrastructurehascoveredover260,000.
TelOneRetail introducednewhomebroadbandpackagesthatare technologyneutral,allowingcustomers toenjoyseamless home broadband solutions. The Division hasenjoyed an upsurge in broadband revenues recordinga 61% increase over the last 4 years. There is room formoregrowthasRetailhas increased its capacity toofferbroadbandsolutionstoover300,000residentialcustomers.
TelOne offers largely traditional voice to its consumerclients while the offer for enterprise has now beenenhanced through offering Voice over Internet Protocol(VoIP).
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Public Wi-Fi The telecommunications landscape in Zimbabwe hassignificantly changed over the years from just the basictelephone to the multimedia Internet based world weare now living in. In Zimbabwe, TelOne has contributedto this revolution through the launch of Public Wi-Fiwhich is accessible to anyone with a Wi-Fi compatibledevice. TelOne launched the PublicWi-Fi service inMay2015withonly10hotspots inHarare,nowtheservice isavailablecountrywidewithover200hotspotswithgrowthprojectionsofover600hotspotsby2019.
TheTelOnePublicWi-FihascausedasignificantshiftinthewaythepublicconsumesInternettakingadvantageoftheendlesspossibilityoftheInternet.Customersarenowabletoenjoytheinternetonthegousingtheirhomebundleoronsiterecharges.Wi-FiHomeandAwayisonekeyfeature
thatwasaddedtotheTelOnebroadbandofferingmakingtheWi-Fi servicemoreconvenientwhileadapting to theneedsofourclients.
TelOne’sPublicWi-Fi,peggedatonly$1for1gig,continuesto gain more acceptance in the market and has nowextended to cater forhigher learning institutions, stadia,fastfoodoutletsaswellasleisurespotslikeSportsclubs.
Looking into the future, the TelOne Public Wi-Fi hasboundlesspotentialtodriveeconomicgrowthandimprovepeople’slivesinZimbabweandbeyond.Wi-Fitechnologywill be fundamental to the realisation of the Internet ofEverything,withTelOneleadingthepackinmakingthisarealityinZimbabwe.
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
TelOneCentreforLearning(TCFL)isatechnologyschoolofferingICTandbusinesscoursesaswellasconferencingfacilitiestoZimbabwe,SADCandbeyond.TCFL,aSADCCertifiedCentreofExcellence,seekstodeveloprelevantskills that are relevant to thedigital economy through various long and short courses including adegree, fivediplomasandanarrayofshortcourses.TCFLalsoplaysapivotalroleinupdatingZimbabweontechnologytrendsthroughhostingoneortwo-dayseminars/conferences.ThefollowingareflagshipTCFLprogrammes:
i. BachelorofEngineeringHonoursDegreeinTelecommunications
ii. DiplomainTelecommunications
iii. DiplomainDataScience
iv. DiplomainSoftwareEngineering
v. DiplomainComputerNetworking
vi. DiplomainDigitalMarketing
TCFLalsodeliversinternationally-recognisedcertificationcoursesinNetworking,MobileCommunications,CybersecurityandSoftSkillsthroughaccreditationandpartnershipswithinternationaltechnologypartners.ThesepartnersincludeHuawei,CiscoSystems,InformaTelecoms,BitcrackSecurityandCity&GuildsofLondon,amongothers.
TCFLseekstoofferinternationalqualificationswhilemeetinginternationaltrainingstandardsthroughpartneringwithstronginternationalbrands.SomeofthepartnershipsinplaceareCisco(USA),Telecoms Academy(UK),City&Guilds(UK)andHuawei(China).TCFLisaregisteredCiscoAcademyandoffersglobally-recognisednetworkingcertifications(CiscoCertifiedNetworkAssociate,CiscoCertifiedNetworkProfessionalandCiscoCyberSecurity).Thecollegehasalong-standingaccreditationwithCity&Guidsfortelecommunicationstraining.TCFLalsoprovidesa TelecomsMiniMBAdesigned for telecoms/ICT executives. Through its partnershipwithHuawei, TCFLofferscertificationcoursesinthelatesttechnologieswhichincludeLTE,CloudComputing,CloudStorage,AccessNetworkandNetworkSecurity.
Student Participation
TCFLhasestablishedaResearchandInnovationClubinordertoharnessandguidestudentcreativity.ThisclubisledbylecturersandhasbeenallocatedaResearchLabwherestudentscanworkonideasoutsideoftheircollegetimetable.
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GOVERNANCE
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CORPORATEGOVERNANCEREPORT• Chairman'sstatement• ManagingDirector'sreport• CorporateGovernancereport
DEAR STAKEHOLDER
It ismypleasure topresentourSustainabilityReport fortheyearended31December2017.
OPERATING ENVIRONMENT
Economic Environment
Building on the issues obtaining and covered in ourpreviousreport,wenotethegrowthofthecountry’sGrossDomesticProductbyanestimated3.5%.Wearepleasedtoreporta3%increaseinrevenuein-linewiththisgrowthin GDP. However, the economy continued to reel underacute liquidity constraints. Foreign currency shortagesovertheperiodalsoledtoaparallelmarketwhichhasseenpremiumpricingandrapidincreasesinthepricesformostgoodsparticularlythosewithanimportcontent.
Telecommunications Sector
TheTelecommunicationsSectorrecordedan11.2%growthinrevenueto$1.1billionin2017from$998millionin2016.This growthwas largely dominatedbyonemajor player.Revenues for the Internet Service Providers (ISP) grewby 18% to $187million. The growth in ISP revenueswassupportedbyanimprovementintheinternetpenetrationratefrom50%in2016to51%in2017.
There was a 6% decline in voice traffic. This evidentlydepicts saturation in the voice segment for theTelecommunications sector in preference for BroadbandInternetandOverTheTopServices(OTTs).
COMPANY FINANCIAL PERFORMANCE
In 2017, TelOne recorded a 3% telecommunicationsrevenuegrowthto$117millionspurredbyincreaseduptakeof our broadband services by the market. Broadbandrevenuesincreasedby36%whilevoicerevenuesremainedsluggishrecordinga9%decline.TheimplementationoftheNationalBroadbandProject(NBB)hadapositiveimpactonrevenueasbroadbandsubscribersincreasedby8.8%from80,745subscribersto87,851subscribers.
On thewhole, it is notable that the increase in revenuecoupled with a 1% decline in operating expenses ledto a 43% improvement in Earnings Before Interest, Tax,Depreciation and Amortisation (EBITDA) to $20millioncomparedto$14millionEBITDAachievedin2016.
Unfortunately, the improved operating performancewasweigheddownbyhighdepreciationchargesof$27millionand legacy loanchargesof$29million.Consequently, thecompany recorded a net loss before tax of $39millioncomparedto$33millionin2016.
Going forward, we expect depreciation expenses to beoffsetbyforecastrevenuegrowth.Thisisalsoexpectedtospurthecompanybacktooperatingprofitability.Further,thecompanywill continue to seek for conclusionon theconversionof the legacy loans intoacapitalcontributionby the shareholder so as to strengthen the company'sbalancesheet.
COMPANY BALANCE SHEET
ThreemajorfactorsaffectingtheTelOneBalanceSheetarethe legacy loan book, Government & Parastatal Debtorsandforeignandlocalcreditors.
The company's balance sheet has been strengthenedby asset additions valued at $70.3million from theimplementationof theNBBProject.However, the legacyloanbook,nowvaluedat$377million,remainsanalbatrossto the financial status of the company. Our externalauditors have issued an emphasis ofmatter on TelOne’sgoing concern status due to the legacy loans which putthecompanyinatechnicalinsolvencyposition.Thelegacyloansrequireurgentresolutionbytheshareholderasthisisaffectingboththeprofitabilityofthecompanyandthebalancesheet.
Further to this, the company is saddled by a high tradedebtors’bookof$149millionofwhich$88millionisowedby the Government and State Owned Enterprises. Thishas resulted inadebt trapwherebythecompany isalsonot able to service its local obligations properly. Theseobligations include interconnection services, licence andspectrum fees as well as pension fund and ZIMRA taxpayables.Whilemindfuloftheeconomicchallengesbeing
CHAIRMAN: MRS J. MACHOBA
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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experiencedbyGovernmentandStateOwnedEnterprises,wecontinuetoimploreontheauthoritiestoaddressthismatterconclusivelytoalloweaseofbusinessbyTelOne.
Availability of foreign currency remains a majorconstraint to the businesswith foreign obligations risingto unsustainable levels. TelOne operations, includingbandwidth importation remain largely dependent onforeign partners. We again continue to call for theprioritisation of foreign currency allocations to settleobligationstothesebusinesspartnerstoavoiddisruptionofservicetoourclientsandstrategicnationaloperations.
CLIENT EXPERIENCE MANAGEMENT
In 2017, enhancing client experience remained a keyprioritywithinthecompany’sstrategyandoperations.Keyinterventionsonbackbonenetworkroll-out,upgradingoftheexchangestoMultiServiceAccessNodes(MSAN)andincreasing distribution channels are some of the precisedevelopments.
On the other hand, network vandalism continues tothreaten the company’s efforts to improve its servicedelivery.Effortstomanagethescourgeareoncourse.
NETWORK DEVELOPMENTS
The company has positioned itself to be the preferredbackbone access provider linking the country with therest of the world. Under the NBB Project, more than50% of the $98.6million investmentwas to expand thebackboneopticfibernetworkwhiletheother50%wasformodernisingtheexistingCoreandAccessNetwork.
SUSTAINABILITY REPORTING
In line with the Global Reporting Initiative (GRI) whichpromotes the use of Sustainability Reporting, TelOnesuccessfullyaligneditsreportingtotheGRIstandards.Thecompanycontinuestoevaluateitsreportingrequirementswithaviewtoachieveasustainableoperation.AdoptingSustainabilityReportingisakeymilestoneconsistentwithour quest to enhance transparency and accountabilitywhichfosterstrustandcollaborationbetweenthebusinessandallourstakeholders.
CORPORATE SOCIAL INVESTMENT
OurCorporateSocial InvestmentPolicyoutlines thecorefocus areas for social investments as Health, Education,Environment and Social Welfare. Over the period, thecompany invested 1% of its revenue towards socialresponsibilities.
BOARD CHANGES
The tenure of the Board of Directors led by Engineer
Charles Shamu came to an end in August 2017. A newBoardofDirectorswasappointedeffective1March2018comprising 4 new members and 2 members from theprevious board to allow for institutional memory andcontinuity.OnbehalfoftheincomingBoardofDirectors,Iwishtothankalloutgoingboardmembersfortheirearnestcontributionandthesolidfoundationlaidtotransformthebusiness.IalsothanktheShareholderforthemandateandconfidenceshowntous,thenewboardtousherTelOnetoprofitabilityandIwelcomethenewandcontinuingboardmembers.Ialsowishtoexpressgratitudetomanagementforaseamlessinductionprocess.
COMMITMENT TO GOOD CORPORATE GOVERNANCE
Theboard recognisesand subscribes to theprinciplesofgoodcorporategovernanceandstrictadherencethereof.The board is committed to the principle of openness,integrityandaccountabilityasrequiredbygoodcorporategovernance guidelines stipulated in the Zimbabwe CodeofCorporateGovernance.Thecompanyhasreviewed itspractices to ensure compliancewith new and upcominglegislation.
GOING FORWARD
Positiveeconomicgrowth is expected in2018,drivenbyincreased investor confidence and continued growth inthe agricultural, mining and tourism sectors. The recentannouncement by Government on the part privatisationof TelOne will bring new opportunities for growth andpartnerships.Atthesametime,thecompanywillcontinuewith itsdrivetoexpandandmodernisethenetworkandbring in new revenue streams. This, together with thesuccessful conclusion of the legacy loan rearrangement,will usher the company to profitability and long termsustainability.
APPRECIATION
We are indebted to our shareholder, business partnersand the regulator for their unwavering support. To ourvaluableclients,wethankyouforstandingwithus.Wewillcontinuetoprioritiseandworkonimprovingourdeliveryofinnovative,reliableandaffordableservices.
I also wish to acknowledge the hard work by thewhole TelOne team comprising the Board of Directors,management and all staffwho continue to demonstratecommitmenttotransformthebusiness.
J. MACHOBA (MRS)
BOARD CHAIRMAN
4 June 2018
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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PERFORMANCE HIGHLIGHTS
THE TRANSFORMATION: BECOMING A BROADBAND COMPANY
The company witnessed an eventful 2017 with theimplementationoftheNationalBroadbandProject(NBB)which is nowmore than90% complete. Theproject hasseen an improvement in the company’s broadbandservice offering through an increase in the backboneand core network capacity. This has spurred growth inour broadband revenues which increased by 36% from$33million in 2016 to $45million in 2017. The growthin broadband revenue has contributed to the overallimproved revenue performancewhich has grown by 3%from$114million in2016to$117million in2017despitethedeclineinvoicerevenues.
TelOnewitnessedadeclineinvoicerevenuesinlinewithworldwidetrends.Voicerevenuescontinuetodeclineascustomer preferences continue to shift towards Internet
MANAGING DIRECTOR: MRS C. MTASA
2017 2016 % Change
Revenue $117 million $114 million 3% ▲
- Voicerevenue $72 million $79 million 9% ▼
- Broadbandrevenue $45 million $33 million 36% ▲
Monthly Blended ARPU $27 $25 8% ▲
Operating Expenses $84 million $85 million 1% ▲
EBITDA $20 million $14 million 43% ▲
CAPEX $68 million $25 million 44% ▲
Employee Engagement Index 49.6% 36.8% 35% ▲
Backbone coverage 3,700 kilometres 2,600 kilometres 42% ▲
Broadband subscribers 87,851 80,745 9% ▲
Customer Satisfaction Index 73% 60% 22% ▲
Protocol (IP) based services. In 2017, the 9% decline incompany voice revenue was fully offset by growth inbroadband services revenue. As at 31 December 2017,voicerevenuecontributed60%oftotalrevenuescomparedto68%in2016.Thisshiftinrevenuecontributionisinlinewithplanstorefocusthebusinessfromatraditionalvoiceto a broadband service centric business. The companytargetstohavevoicecontributiontorevenuegoingdownto lessthan40%andbroadbandcontributiontorevenueincreasingupto50%by2019.
FINANCIAL PERFORMANCE
Revenue contribution by product
Profitability
The company’s profitability at EBITDA level improved by43%growingfrom$14millionto$20million.Theimprovedperformance was achieved through growth in overallrevenueperformanceandareductioninoperatingcosts.Depreciation and amortisation expenses increased by7%from$25.5millionto$27.3million in linewithcurrentinvestment efforts tomodernise our network.Operatinglosses(EBIT)reducedfrom$12millionin2016to$7millionin2017.
The business incurred a Loss Before Tax of $39milliondue to legacy loan expenditure of $29million made upof legacy loanfinancecostsand foreignexchange losses.LoansclassifiedaslegacyloanswereincurredinthePostsandTelecommunicationsCorporation(PTC)erapriortoitsunbundlingin2001.Legacyloanexpenseswhichcontinueto reverse efforts to achieve profitability increased from$19millionin2016to$29milllionin2017.
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50,000
100,000
150,000
200,000
250,000
300,000
2017 2016 2015
Subsciber base
Voice Fixed broadband
Voice 60%
Broadband38%
CFL2%
2017
Voice68%
Broadband30%
CFL1%
Other 4%
2016
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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BALANCE SHEET
TheTelOnebalancesheetistechnicallyinsolventasaresultof the legacy loans.However, there is a significantuplift inassets from $489.7million in 2016 to $548million due tonetworkinvestmentsmadeaspartoftheNationalBroadbandProject.Without legacy loans, thenetassetpositionwouldbeapositive$232million.Liquiditychallengesintheeconomyresultedinthegrowthofdebtorsandthisalsoaffectedthecompany’sabilitytoservicecreditors.
Accounts receivables
TelOne’s net account receivables grew to $149million from$145million in 2016. The amount ismade up of balancesdue from Government Ministries, Parastatals, CorporatesandHousehold clients.Government andParastatal debtorsof$88millionconstitute59%ofthenetaccountsreceivables.Delayedsettlementbydebtorscontinuetohaveanegativeimpactonthecompany’sabilitytosettlecriticalstatutoryandcontractualaccountspayables.
As part of the National Broadband Project, the businessintroduced prepaid billing to residential customers anddefaultingcorporatesaspartofeffortstomanageaccountsreceivables. Further, during the year, thebusiness resorted
tocharginginterestondefaultingdebtorstoencourageearlysettlementofamountsdue.
Accounts payables
Accounts payables increased by 17% during the year from$128millionin2016to$150millionin2017.This increaseisduetochallenges facedbythebusiness insecuring foreigncurrency to settle foreign obligations amounting to $25million.Settlementofcriticallocalcreditorsof$98millionhasbeenaffectedbylatesettlementofaccountsreceivables.Localcreditors,namelyPostalandTelecommunicationsRegulatoryAuthorityofZimbabwe,ZimbabweRevenueAuthority,localinterconnection partners and Pension Fund are collectivelyowed$90million.
Timelysettlementofcreditorsishingeduponthecompany’sabilitytorecoverthedebtor’sbook,thereforemanagementwill continue to be focussedon collectionof amounts duefromdebtors.
Impact of Legacy Loans on TelOne’s Financial Status
Thecompany’sbalancesheetcontinuestocarrylegacyloansof$377millionasat31December2017.Theseloanshaveanegativeimpactonthecompany’sfinancialperformanceasshownbelow.
Summary statement of profit or loss 2017 2016 Without With Without With legacy loans legacy loans legacy loans legacy loans US$ US$ US$ US$
Revenue 116,701,488 116,701,488 114,042,935 114,042,935Earnings before interest, tax, depreciation& armotization (EBITDA) 20,399,562 20,399,562 13,898,199 13,898,199Depreciation&armotization (27,316,392) (27,316,392) (25,525,563) (25,525,563)Specialexcisedutyonairtime (1,270,826) (1,270,826) - -Financecosts (2,043,928) (2,043,928) (1,807,460) (1,807,460)Legacyloanexpenses:financecostsandexchangelosses - (29,224,868) - (19,274,082)Loss before tax (10,231,584) (39,456,452) (13,434,824) (32,708,906) Summary statement of financial position ASSETS Noncurrentassets 365,397,861 365,397,861 329,496,152 329,496,152Currentassets 182,976,561 182,976,561 160,248,385 160,248,385TOTAL ASSETS 548,374,422 548,374,422 489,744,537 489,744,537 EQUITY AND LIABILITIES Capitalandreserves (114,982,165) (144,207,033) (111,194,861) (111,194,861)Legacyloansconvertedtoequity 347,402,062- 350,987,582- 232,419,897 (144,207,033) 239,792,721 (111,194,861) Liabilities Foreignlegacyloans - 376,626,930- 350,987,582Longtermpayable 4,517,258 4,517,258 17,365,361 17,365,361Otherliabilities 311,437,267 311,437,267 232,586,455 232,586,455 315,954,525 692,581,455 249,951,816 600,939,398TOTAL EQUITY AND LIABILITIES 548,374,422 548,374,422 489,744,537 489,744,537 Net asset/(liability) position 232,419,897 (144,207,033) 239,792,721 (111,194,861)
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Tel-One (Private) Limited 2017 Sustainability Report
17
Without these loans, the company would have posteda narrowed Loss Before Tax of $10.2 million in 2017an improvement compared to a Loss Before Tax of$39.5millionwiththelegacyloans.
Thecompany is ina technical insolvencypositiondue tothe legacy loans. These loans place a limitation on thecompany’s ability to attract funding to modernise andexpandthenetworkwithfocusontheaccessnetworktocomplement the improved core network. The companycontinuestopursuedebtassumptionbyshareholderasawayofrecapitalisingthebusiness.
SERVICE TO OUR CUSTOMERS
Various initiatives were undertaken during the year toimprovecustomerexperienceasoutlinedbelow;
Client Experience
In2017,afully-fledgedClientExperiencedepartmentwasintroducedwithamandateofupholdingservicestandardsacross all TelOne touch points. Further initiativeswill bedeployedinthisareatoachievecontinuousimprovementin our service delivery. Customer experience has beenaffectedbythehighoccurrenceofcoppercabletheftfromournetwork.Atotalof133casesoftheftofcoppercablesfromthenetworkwerewitnessedin2017.Variouseffortsare beingmade to protect the network and reduce theoccurrenceofcasesoftheftofcoppercables.
Thedeliberatefocusincustomerexperiencemanagementhashoweverresultedinanimprovementofthecompany’scustomer satisfaction index from60% in 2016 to 73% in2017.
Distribution Channels
Toenhanceaccessibility and improvedclientexperience,the company has transformed all of the 115 exchangescountry-wide into customer service centres to alloweaseofaccessbyourclients.Overtheyear2017,atotalof 7 customer service centres were relaunched with animproved and modernised look and feel. For furthercustomer convenience, the company’s distributionnetworkwas increased to incorporatemajor retail chainstores with a collective network of over 210 branches.Onlinemerchantsandmobilepaymentplatformshavealsobeenenlistedaspartners.
Know Your Customer (KYC) Campaign
To allow us to communicate betterwith our clients anddevelop relevant products, the company launched anexercise to review and update client data records. AKYC Campaign dubbed ‘Update and Win’ was launchedduring the year allowing us to update records for 70%
of our clients. Efforts will continue to update our clientrecordstargetingtoupdate100%ofourclientrecordsbyDecember2018withthecoreobjectiveofimprovingclientserviceandtheultimateexperience.
COMMUNITIES AND SOCIAL RESPONSIBILITY
TelOne continued to conduct itself responsibly as acorporate citizen both through its daily operationsand in its social investments. Specific Corporate Socialresponsibilityprogrammeswererunthroughouttheyearfocussing on environmental sustainability, communityhealth,education,mentorshipandsocialwelfare.A totalof $204,000was spent in support of these programmeswith at least 3,000 families benefiting from the healthprogramme, 5,000 trees being planted and more than1,000 litter bins being distributed in different cities andtownsacrossthecountryinmajorclean-upcampaigns.
Connectivityforallremainedafocusareathatinfluencedinvestment in the network to reach and improvecommunication across the country. In this regard, thecompany donated communications equipment andbandwidthto30ruralschools.
OUR EMPLOYEES
Thecontributionsthatthecompanycontinuestoreceivefrom its employees cannot be underestimated. Staffengagement surveys continued as a strategy to have amore in-depth understanding of employees’ needs. As aresult,thecompanyadoptedahumaneleadershipmodeltoimprovetrustlevelsbetweenmanagementandstaff.
Thecompanyalsopursuedvariouswelfareinitiativeswhichincludedcancer,HIV,diabetesandhypertensionscreeningduringwellnessfareswhichareconvenedthroughouttheregions. The company also promotes a healthy lifestylethrough structured wellness programs that includesportingcompetitionsinthefollowingdisciplines;football,netball,athletics,volleyballandchess.
Thestrategicbusinessunitmodelintroducedin2016hasimprovedacultureofaccountabilityandentrepreneurshipas all levels of staff are now focussed on improvingclient experience, revenues and collections. The newbusinessmodelhasbeencomplementedbyanimprovedperformancemanagementsystemwhereeachemployeehasaperformancecontract.
As a result of the above initiatives, the TelOne 2017EmployeeEngagementSurveyresultsrevealedanupwardimprovement in the Employee Engagement Score from36.8%in2016to49.6%in2017.
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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NETWORK AND SYSTEMS UPGRADES
Thebusinesscontinuesonanetworkmodernisationandexpansion drive with capital expenditure of $68millionin 2017. Major projects completed in 2017 include thefollowing;
• Bulawayo-BeitbridgeOpticfibrebackbonelink.• Harare-Masvingobackboneopticfibrelink.• MashonalandNorthRingnodeupgrade.• Mutare-Harare-Bulawayo-Plumtreenodeupgrade.• Gweru-MasvingoOpticFibreupgrade.• Bulawayo-VictoriaFallsbackbonelinkupgrade.• Nyanga-Mutare-ChiredziIPradiobackbonelink
upgrade.• Variousfibretothehomeprojectsconnectingmore
than10,000homes.
The above projects have the following benefits to the business and the country at large:
• Increasedcapacityforbroadbandservicesforlocalandregionalclientswithlinksupgradedupto100Gigabytesformajorroutes
• Reducedbandwidthlandingcost• Improvedserviceuptimeasournetworkisnowmore
resilientwithredundancytoensureuninterruptedcustomerserviceintheeventofdisruptionsonanylink.
DATA CENTRE SERVICES
During the year, the company launched a tier 3 datacentre tobecome theonly telecommunicationsoperatorofferingdata centre services in the country.Demand fordatacentreservicehasbeensignificantwith60%capacityutilisation for installed capacity as at 31December2017fortheHarareDataCentre.Thecompanyismakingfurtherinvestmentsindatacentreswhichwillbelaunchedin2018andwillprovidecustomersanopportunity to reduce ICTcosts.
CHANGES TO THE BOARD OF DIRECTORS
AnewBoardwasappointedinthefirstquarterof2018tooverseetransformationof thecompany intoprofitability.OnbehalfofmanagementandTelOnestaff,IwishtothankoutgoingboardmembersfortheirmentorshipandsupportandwelcomenewdirectorstotheBoard.Variousinitiativeshavebeenpursuedtoinductthenewboardmembersonthecompanystrategicdirectionandoperations.
OUTLOOK
Weareexcitedaboutourfutureaswearelookingforwardtointroducingnewproductsandimprovedservicestoourcustomers.Ouroptimism ispremisedon the successwehave built in 2017 in improving our broadband networkand the apparent increase in broadband revenue. Thefollowingwillbeourstrategicfocusareasgoingforward:
• Conclusionoflegacyloanrestructuring• Recoveryofouraccountsreceivablestoallow
settlementofaccountspayables• Strengtheningofresearchanddevelopmentcapability• Furtherrevenuegrowthforenhancedprofitability• Improvementsinouraccessnetworktoconnectmore
businessesandcommunities• Continuedimprovementinourresponserateto
customerqueriestoensureauniquecustomerexperience
• EffectivecollaborationwithotherStateOwnedEntities
APPRECIATION
It is my pleasure to extend appreciation to our valuedclients, our shareholder, our Board of Directors and theregulator for their continued support and guidance. IalsowishtoexpressmygratitudetoTelOnestafffortheirdedicationtomeetingclientexpectationsinthefaceofachallengingoperatingenvironment.
We continue to move forward in bringing people together.
C. MTASA (MRS)
MANAGING DIRECTOR
4 June 2018
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Tel-One (Private) Limited 2017 Sustainability Report
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MasterofBusinessLeadership(UNISA) PostgraduateCertificateinCorruptionStudies(UniversityofHong
Kong) BAHonoursSociologyandSocialAnthropologywithDevelopment
Studies(TheUniversityofHull,UnitedKingdom) DiplomainSocialStudies(FircroftCollege,UnitedKingdom) DiplomainPublicRelations,ZimbabweInstituteofPublicRelations
(ILSACollege,Zimbabwe)
Mrs. Juliet MachobaNon-Executive Chairman
LicensedAircraftMaintenanceEngineerCategory“X”(CivilAviationAuthorityofZimbabwe)
DiplomainAircraftRadio&Telecommunications(ZimbabweAviationTRGCentre)
HND-Electronics–AirforceInstituteofTechnology(Kaduna,Nigeria) PartIII-Telecommunications-City&Guilds,London
Mr. Edward DubeNon-Executive DirectorChairman - Board Business Development, Marketing and Technical Committee (BMT)Member - Board Human Resources Committee
CharteredAccountant(Zimbabwe) ZimbabweCertificateofTheoryinAccounting(ZCTA) HonoursBachelorofAccountingScience(UNISA) BachelorofCommerce(Honours)degreeinAccounting(NUST)
Ms. Belinda MuswakaNon-Executive DirectorChairman - Board Finance and Audit CommitteeMember - Board Business Development, Marketing and Technical Committee (BMT)
DIRECTORATE
NewindependentdirectorswereappointedtotheTelOneBoardofdirectorswitheffectfromMarch2018followingexpiryofthetenureofthepreviousboardinAugust2017.Thecurrentboardofdirectorsisconstitutedasfollows:
Master’sinBusinessAdministration(ZOU) FoodandBeverageManagementCertificate(AHMA) SalesandMarketingManagementCertificate(AHMA) AmericanHotelandMotelAssociationCertificate(AHMA) HNDInHotelManagement(BulawayoPolytechnic)
Mr. George ManyumwaNon-Executive DirectorChairman- Board Human Resources CommitteeMember - Board Finance and Audit Committee
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Tel-One (Private) Limited 2017 Sustainability Report
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
CharteredAccountant(Zimbabwe) BachelorofAccountancyHonours(UZ) ExecutiveManagementDevelopmentCertificate(Universityof
Pennsylvania)
CertifiedAcceleratedSAP(ASAP)Consultant Master’sinBusinessAdministration(UZ) HonoursDiplomainComputerProgramming,Canada IPMZCertificate(IPMZ) MasterofEducation-(UZ) BachelorofEducation(Science)(UZ) T1CertificateinEducation-GweruTeachersCollege
Mr. Simon C. ChigwambaNon-Executive DirectorMember - Board Human Resources CommitteeMember - Board Business Development, Marketing and Technical Committee (BMT)
Mrs. Chipo MtasaManaging DirectorEx-officio Board member
ManagementAdvancementProgrammePlus(HenleyBusinessSchoolAfrica)
BachelorofLawsHonours(LLBHons)(UZ)) BachelorofLawHonours,(BLHons)(UZ) GraduateoftheInstituteofCharteredSecretariesand
AdministratorsofZimbabwe
Mrs. Viola M. ChasiNon-Executive DirectorMember - Board Finance and Audit CommitteeMember - Board Human Resources Committee
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
OUR APPROACH TO CORPORATE GOVERNANCE
TelOneendeavourstoensurethelegality,soundnessandtransparencyofbusinessoperationsaswellasrespondingtotheeverchangingeconomic,socialandlegislativeoperatingenvironment.Thecompanyplacesimportanceonorganisationalefficiencyandtransparencywhilemaintaininganappropriatelevelofcontrolforthefulfilmentofthecompany’smandate.Thecompanyhascleardelineationofactivities,withtheBoardprovidinganoversightroleandmanagementdefiningtheapproachtoachievethebroadergoalsofthebusiness.
Ourturnaroundprogrammeishingedonobservanceofstandardsofethicsandprofessionalconduct.Wearebuildingaculturethatshouldentrenchastrongvaluesystemfromshopfloortothehighestlevelofdecisionmaking.ThecompanymanagesthistransformationthroughthebenefitofourexperiencedandskilledBoardmembers.
Governance structure
Our Board executes itsmandate through committees comprising the Finance andAudit; HumanResources; and theBusinessDevelopment,MarketingandTechnical(“BMT”)Committees.
Board member Designation Committees
Mrs.J.MachobaBoardChairpersonNon-ExecutiveDirector
N/A
Ms.B.Muswaka Non-ExecutiveDirector FinanceandAudit-Chairman BMT
Mr.E.Dube Non-ExecutiveDirector BMT-Chairman HumanResources
Mr.G.Manyumwa Non-ExecutiveDirector HumanResources-Chairman FinanceandAudit
Mrs.V.M.Chasi Non-ExecutiveDirector HumanResources FinanceandAudit
Mr.S.C.Chigwamba Non-ExecutiveDirector HumanResources BMT
Mrs.C.MtasaManagingDirectorExofficiomemberoftheboard
All
Finance and Audit Committee
TheFinanceandAuditCommitteeprovidesoversighttomanagement’sfinancialreporting,internalcontrolsystems,riskmanagementandtheinternalandexternalauditfunctions.Toimprovetransparencyandadherencetobestpractice,ourexternalauditorsareinvitedtoattendallCommitteemeetings.MattersreportedtotheBoardbytheFinanceandAuditcommitteecoversawiderangeincluding; Financialstrategicplans Auditplansandbudget Corporategovernance Operatingbudgets Capitalexpenditureprogrammefunding Financialreporting Internalauditmattersandinternalcontrolenvironment Enterpriseriskmanagement Externalauditmatters Companyfinancialpoliciesandprocedures
Human Resources Committee
TheHumanResourcesCommitteeoverseesthehumanresourcesfunctionwithinthecompanyincludingoversightoverthe
humanresourcestrategy,humanresourcepolicies,humancapitaldevelopment,compensationandtalentdevelopment.
Tel-One (Private) Limited 2017 Sustainability Report
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Thecommitteeprovidesoversight,evaluatesandconsidersforapprovalmatterspertainingto:
• Humanresourcestrategyplan• Humanresourcepolicies• Performancemanagement• Executivecompensation• Stafftraininganddevelopment• Health,safetyandenvironmentalissues;and• Othermattersthattheboardmayrefertothe
committeefromtimetotimeinconnectiontothecompany’shumanresources
Business Development, Marketing and Technical Committee (BMT)
The role of the business development, marketing andtechnicaldevelopmentcommitteeistosupportandadvisetheboardinexercisingitsauthorityinrelationtobusinessdevelopment,marketperformanceandtechnicalprojects.
The committee is responsible for approval and on-goingoversightmatterspertainingto:
• Thecompanystrategyandboardbusinessobjectives;• Businessdevelopmentissues;• Marketingstrategy;
• Technologystrategy;• Capitalprojectsplanningandimplementation;and• Othermattersthattheboardmayrefertothe
committeefromtimetotimeinconnectionwiththecompany’sstrategyandbusinessperformance
Board induction programme
Following appointment of the Board in March 2018,all Board Members were taken through a designedinductionprogrammecoveringthelocalandinternationaltelecommunications industry, company performance,strategyandanoverviewofoperations.
Annual board evaluation
An annual Board Self Evaluation System is in place forthe evaluation of the performance of individual BoardMembersandtheBoard’sEffectivenessonanannualbasis.The lastsuchevaluationwascarriedout in2016andthenextevaluationwillbecarriedoutin2018.
Director tenure and meeting attendance
We take pride in the commitment exhibited by ourDirectors reflected by the meeting attendance of above80%asshownbelow:
NAME YEAR OF FIRST APPOINTMENT
TO BOARD
MAIN BOARD (2 MEETINGS)
HUMAN RESOURCES
(2 MEETINGS)
FINANCE & AUDIT
(3 MEETINGS)
BMT(2 MEETINGS)
AGM(1 MEETING)
Members Of Current Board
J.MACHOBA 2018 N/A N/A N/A N/A N/A
B.MUSWAKA 2018 N/A N/A N/A N/A N/A
E.DUBE 2018 N/A N/A N/A N/A N/A
G.MANYUMWA 2018 N/A N/A N/A N/A N/A
V.M.CHASI 2012 1 2 2 N/A 1
S.C.CHIGWAMBA 2014 2 2 N/A 2 1
C.MTASA 2013 2 2 3 2 1
Retired Board Members
C.S.SHAMU 2012 2 N/A N/A N/A 1
J.C.WEKWETE 2007 2 N/A 3 2 1
S.E.SIBANDA 2012 2 2 3 N/A 1
S.Z.GATA 2014 2 N/A 3 2 1
W.MUSUNGWA 2014 2 2 N/A 2 1
Tel-One (Private) Limited 2017 Sustainability Report
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CharteredAccountant(Zimbabwe) BachelorofAccountancyHonours(UZ) ExecutiveManagementDevelopmentCertificate(Universityof
Pennsylvania)
MastersofBusinessAdministration(UZ) BachelorofEnglishandCommunication(UZ) DiplomainPersonnelManagement(IPMZ) DiplomainTrainingManagement(IPMZ)
MastersofBusinessAdministration(UniversityofGloucestershireUK)
BachelorofCommerceHonoursDegreeinMarketing(NUST) FellowMarketingAssociationofZimbabwe(MAZ)
CharteredEngineer(CEng) MemberoftheZimbabweInstitutionofEngineers(MZweIE) MemberoftheInstitutionofEngineeringandTechnology(MIET)
ofUnitedKingdom. RegisteredwiththeEngineeringCouncilofZimbabwePr(Eng)&
EngineeringCouncilofUnitedKingdom MastersofBusinessAdministration(UZ) BScHonoursElectricalEngineering(UZ)
Mrs. Chipo MtasaManaging Director
Mr. Hopewell ZinyauCorporate Services Director
Mr. Joseph MachivaDivisional Director Retail
Eng. Lawrence NkalaDivisional Director Infrastructure and Wholesale
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
SENIOR MANAGEMENT
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CharteredAccountant(Zimbabwe) CertifiedInformationSystemsAuditor(ISACA) HonoursBachelorofAccountingScience(UNISA) BachelorofCommerce(Honours)Degreein
Accounting(NUST)
JointHonoursinLawandPolitics(UK) BarristeratLaw
MastersofBusinessAdministration(UZ) BScElectricalEngineering(UZ) MemberoftheZimbabweInstitutionofEngineers
(MZweIE) BlackBelt-SixSigma
AnAssociateoftheInstituteofCharteredSecretariesandAdministrators.
BachelorofAccountingSciences(UNISA) AdvancedDiplomainManagementAccounting(CIMA) MastersofBusinessAdministration(Universityof
Gloucestershire)(Current)
Mr. Kudakwashe MusundireAudit & Risk Executive
Mrs. Caroline SanduraCompany Secretary & Legal Advisor
Eng. Jeremiah T. MunembeInnovation Executive
Mr. Christopher MaunganidzeActing Finance Director
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Tel-One (Private) Limited 2017 Sustainability Report
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OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Management committees
Management has put in place committees to assist inmanagingbusinessoperationsasfollows;
Executive committee
The executive committee has the responsibility tomanage the affairs of the company. The ExecutiveCommittee reviews significant functionsof theCompanyand recommends appropriate action to the Board. TheExecutive Committee is tasked with implementation ofthe company’s strategy, ensuring that there are soundpolicies and procedures in place to guide operations. Italsoensures that thereareadequatesystemsof internalcontroltosafeguardcompanyassetsandresources.
Risk and compliance management committee
This committeemeetsmonthly to review the company’srisk profile and monitor implementation of appropriateactionstomitigateidentifiedrisks.
Membership of the committee is as follows:
• EngineerL.Nkala-DivisionalDirectorInfrastructureandWholesale(Chairman)
• Mr.K.Musundire-Audit&RiskExecutive• Mr.H.Zinyau-CorporateServicesDirector• Mr.J.Machiva-DivisionalDirectorRetailDirector• EngineerJ.Munembe-InnovationExecutive• Mr.C.Maunganidze-ActingDirectorFinanceand
Administration• Mrs.C.Sandura-CompanySecretaryandLegalAdvisor• Mrs.A.Ushe-EnterpriseRiskAnalyst
Internal audit
The company has in place an independent risk internalauditfunctionwhichreportsfunctionallytotheFinanceandAuditCommitteeoftheBoard.TheInternalAuditfunctionisgovernedbyaninternalauditcharterwhichisreviewedregularly. InternalAudit’s scopeofwork is reviewedandapprovedby the Finance andAudit Committeeannually.TheFinanceandAuditCommitteealsoreceivesquarterlyreportsonInternalAudit’swork.
Performance management
We have in place a performance management systemwhichwasdevelopedfromtheresultsbasedmanagementsystem. The performance management system evolvesfromthecompanystrategywherebydepartmentaltargetsand strategic initiatives are first determined at companylevel. Following the determination of departmentalstrategies,individualemployeeperformancecontractsaresignedoff foreveryemployee. These contracts form thebasisofperformancereviewswhicharedoneformallyon
aquarterlybasis.
Business ethics, integrity and transparency
TelOne is committed to upholding high standards ofintegrity and corporate governance in all operations.TelOne will conduct itself in an open, honest, ethicaland transparent manner. The company recognises theimportance of protecting its human, financial, physical,informational, social, environmental and reputationalassets.Tofacilitatetheinvestigationofanyinstancewhichgoesagainst the company’s values, the companyhas forthelast5yearsoperatedanindependentandanonymousfraud reporting hotline, Tip Offs Anonymous, offeredthroughDeloitteandTouche.
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SUSTAINABILITY• Ourstrategy• Responsibilitytoourcustomers• Responsibilitytoourshareholder• Responsibilitytooureconomy• Responsibilitytoourcommunityandenvironment• Responsibilitytoouremployees• Ourperformancesummaryasasustainableand
responsiblebusiness• Riskreport
The company’s strategy is based on the following key pillars
• SustainabilityandGovernance• ClientExperienceManagement• TechnologyandInnovation• HumanCapitalDevelopment
Sustainability and Governance: Becoming a broadband company
TelOnecontinuedwithitsTransformationStrategyin2017withspecialemphasistotransformthecompanyfrombeingtechnologycentricintoacustomerservicecentriccompany.Toachievethis,thecompanyhasgonethroughthefollowingmilestonechangesoverthelast3years:
• Invested$103millionintoournetworktoreplaceoutdatedequipmentwithdigitalexchanges• Increasedourbroadbandserviceofferingfrom73,000subscribersto87,000• Increasedourfibrefootprinttopassmorethan24,000homesin2017• Increasedfocusonourservicedeliveryresultinginanimprovedcustomersatisfactionindexof73%• Increasedourcustomertouchpointswith7customerservicecentresupgradedduringtheyear• Reducedouroperatingcostsby19%from$129millionin2015to$104millionin2017• Improvedvisibilityofourbrandinthemarketplace
TheTransformationalStrategyisa5yearplanimplementedfortheperiod2014to2018asillustratedbelow;
Human Capital Transformation
ToreinforcetheHumanCapitalTransformation,thecompanyhasovertheyearsoughttoincreaseemployeeengagementthrough:
• Engagingallemployeelevelsinthestrategicplanningprocesstoachieveownershipandacceptanceofthecompany’sstrategicdirection
• Engaginginopendiscussionsaboutthecompany’sperformance• Regulartrackingoftheemployeeengagementindexandimplementingdeliberateleadershipstylechangestoallow
increaseddialoguebetweenalllevelsofstaff
Thecompanyhasalsomadesignificantprogressinupgradingitsskillsbasewith320engineersandtechnicianshavingbeentrainedinthedomainsofinformationtechnology,informationsecurity,constructionandmaintenanceofInternetProtocol(IP)networksamongothers.
2014
Non CapitalIntensive Initiatives Commercialisation2017
2016
20152015
20142018
-2021
InvestmentPeriod
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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Technology and innovation transformation pillars
Thecompanyhasanetworkandtechnologytransformationroadmapwhichisaimedatenhancingclientexperienceandimplementinginnovativebusinesssolutionsforourcorporatecustomers.Thistransformationroadmapcommencedin2016andisanchoredbytheNationalBroadbandprojectatacostof$98millioncovering:
• Backbonetransmissionnetworkupgradeandexpansion• DataCentreandCloudFacilitiesinHarareandBulawayo• Upgradeinbusinesssupportsystems• Accessnetworkmodernisation
Business Process Transformation
ThecompanyhasadoptedLeanManagementasaphilosophytoachieveefficienciesinoperationsandincreasetherateatwhichcustomerrequestsareaddressed.LeanManagementhasbeenadoptedasajourneythroughwhichcompanyprocesseswilladdvaluetoourcustomers.
Goingforward, thecompanyplanstocontinuewithacountrywiderolloutand implementationof leanmanagementprinciplesin2018.
Sustaining Transformation through Sustainability Reporting
The company adopted Sustainability Reporting as governed by GRI Standards in 2016. Sustainability reporting wasadoptedsoastoattaintransparencyinreportingonbothfinancialandnon-financialmattersinvolvingthecompanywithanimpactonoureconomy,ourcustomersandcommunities,theenvironmentandCorporateGovernanceaspectsofthecompany.
AligningtothesepillarsiskeytodeliveringvaluetoourShareholder,Customers,CommunitiesandEmployees.
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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Ourcustomersaretheheartofourbusiness.Wehaveputinplacemechanismsthatensurewedelivervaluetoourcustomers.
Client Experience Management
The company recognises that Client Experience is thegamechangerintheservicespace.Adeliberateeffortwasthereforetakenduringtheyeartoestablishafully-fledgedClient Experience Department whose key mandate wastodefineanduphold service standardsacross all TelOnetouch points as well as managing the experience of allTelOneclientsastheyinteractwithourproducts,servicesandstaff.Severalinitiativestoenhanceclientconveniencehave been implemented. These initiatives include theintroduction of 13 new third party agents who includeretailchainstorescomingonboardtocomplementour32outlets countrywide.Fouronlinepaymentplatformsalsowentliveduringtheyear.
Thecompanyhasconnectedatotalof1,375ruralschoolsand clinics across the country. This initiativehasallowedpupilsandteacherstoaccessawiderlibraryofeducationalresourcesataffordabletariffs.
Our service uptime promise
TelOneisconstantlyreviewingitsoperationstoenhancethequalityofitsproductstothemarket.
To allow an acceptable service uptime, the companycontinuouslymonitors uptimeof its transmission andswitching network. There was an improved serviceuptime from 99.90% in 2016 to 99.94% in 2017. Thecompanytargetstoachieveanuptimeof99.95%.Ourperformancewas impacted largely by power outagesand cable cuts which affected our redundancy links.Tominimise the impact of these factors, in 2017 thecompany invested in upgrading and increasing itsprimaryandredundancylinkstoensureresilienceandanimprovedserviceuptime.
Plans are in place to explore the feasibility of solarpowertomanagebothcostsandcarbonemissionstotheenvironment.
Average Service Turnaround Time (ASTT)
Thecompanystrivestoensureallnewservicerequestsareattendedtowithin24hours.Measureshavebeenimplementedtoensureourperformancemanagementsystems place emphasis on speed of service delivery.During the year, we managed to provide services tocustomerswithina25hourturn-aroundperiod.Wearecontinuously monitoring our processes to ensure weoperatewithinthetargeted24hourturn-aroundtimeforallourproducts.
Mean Time to Restore (MTTR)
During the year, the company’snetworkwasaffectedby theft of copper from its network. This has had anegative impactonourmeantime to repair faults asdemonstrated below. Plans have been put in placeto curb network vandalism while also educating ourcustomers and the public on the impact of thefts ofcablesfromournetwork.
Our increasing distribution network
Thecompanystrives toensureconveniencetoallourcustomers in accessing our services 24 hours everydayoftheyear.Toachievethis,wehavetakenstepstoincreaseourdistributionnetworkasfollows.
Channel 2017 Status
ClientServiceCentres
Increasedourservicecentresfrom32centresin2016to39centresin2017.
Onlineandmobileplatforms
Servicesarenowavailableonlinethroughourwebsiteandmobilemoneyplatforms.
Retail OurservicesarenowavailableinallmajorretailoutletsincludingOKZimbabwe,TMPick‘n’Pay,SparandChoppiesSupermarkets.
99.82
99.84
99.86
99.88
99.9
99.92
99.94
99.96
Transmission Uptime Switching Uptime
Perc
enta
ge
TRANSMISSION AND SWITCHING UPTIME
2017 2016
0
5
10
15
20
25
30
2017 2016
AVERAGE SERVICE TURNAROUND TIME (HOURS)
Voice ADSL FTTH
0
5
10
15
20
25
30
35
2017 2016
MEAN TIME TO RESTORE (HOURS)
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Tel-One (Private) Limited 2017 Sustainability Report
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Mr. Matthew Smith
It’sallcredittoyouandyourwonderfulorganisation.ItwassuchabreathoffreshairgoingintoTelOne.Itwasphenomenalandyourteamwasphenomenal.ThepositivereviewsandcommentsbymostBulawayopeopleaboutyourupgradedservicesandADSLshowshowwell
receivedithasallbeen.Congratulationsandthankyouformakingusproud.
Tiny Tots Junior School
ThisistoformallyrecordourgratitudetoyouandtheentireTelOneteamforexpeditiouslyresolvingthenagging
problemsthatwewerefacingatTinyTotsJuniorSchoolinMsasaPark.Weappreciatethespeedwithwhichyougottheteamonthegroundandthesatisfactoryresolutionoftheissues.Thequalityofsignalisexcellent.
Wecantellyouthatastheleadersofthatschool,ourstaff,studentsandparents,weareextremelydelightedbybeing“live”atalltimes–it’sarealbreathoffreshair,Sir.ToborrowfromthePresidentofZimbabwe“TinyTotsisnowalsoopenforbusiness”,andwelookforenhancedenrolmentsfor
thegrowthofourcountry.Never Dabuka Mhlanga
Executive Director
Thepublicwi-fihotspotoffersthecheapestdatabecauseweonlyget300mbfromourmobileserviceproviders.
The$1for1gigdataallowsmetodownloadallthevideosIwantwithoutworrying.Ithasalsoallowedmetomake
myuniversityapplicationswithease.
Ropa Chirere, Harare
WHAT THE CLIENTS SAID
Tobacco Sales Floor: Client experience management
WearecurrentlyusingTelOneVirtualPrivateNetwork(VPN)services.Wehave33branchesconnectedthroughTelOneVPN.TelOneisasolidandreliableICTservicesprovider.Theirservicesarecosteffective,andreliable.Weareimpressedwiththeiraftersalessupportand
absolutelyhappywiththeirservice.
TelOnemembersofstaffduringBlueFridayfundaytomarkthebeginningofcustomerservice
month
Oneofthenewlookclientserviceoutletslaunchedin2017
ClientsenjoyingafteracustomerengagementeventandlaunchoftheTelOneZITFOutlet.
TelOneclientengagementonthenetworkmodernisationprojectandnewservicesbeingoffered.
Toimprovecustomerconvenienceandaccesstoproducts,TelOnein2017increaseditsdistributionchannelstoincludemajorchainstoresandseveralbanks.
HALL DIRECTIONAL BRANDING
WITH PREPAID VOICERECHARGE CARDS
ENJOY MORECONVENIENCE
VISIT: selfservice.telone.co.zwFor SELF SERVICE
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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Area Police Station
#ConnectedNation
General Emergency911 or 999
Fire 993
Ambulance 994
995
TelOne offers
Toll Free Service for Emergencieson the following numbers:
Runhare House, 107 Kwame Nkrumah AvenueHarare: (04) 783 565/6, Bulawayo: (09) 717 760 or 886 688Gweru: (054) 221 794 or 230 617, Mutare: (020) 63395 or 67666Masvingo: (039) 263 284 or 263 384Call Centre: (04) 700 950
TelOneisdeterminedtocreatevaluefortheShareholderthroughtheimplementationofasustainablebusinessstrategy. Since2016, the companyhasembarkedona capital intensiveprogrammeaimedatmodernising thetelecommunicationsnetworkstartingwithbackbonelinksundertheNationalBroadbandProject(NBB).
Thecompany’sstrategyisunderpinnedontheavailabilityofbroadbandservicestoeveryoneinZimbabweby2020.TheNBBprojecthasincreasedourfibrefootprinttoallowustolinkallmajorcitiesandtownsinthecountry.ThisisinlinewiththeGovernment’s100dayplansandZIMASSETblueprint.Wearecommittedtoexpandingournetworkandservicestoprovidereliablebroadbandandcommunicationsolutionstoruralandperi-urbancommunities.
TelOne is pursuing financial and non-financial targets which include contributing to the development of ourcommunities,economyandcustomers’easeofdoingbusiness.Thecompanyistargetingtopayadividendat3timescoverby2021.
Thecompany, ledby itsboard,managementandstaff is committedtoupholdingstandardsofgoodcorporategovernanceinallaspectsofthebusiness.
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
2017 ANNUAL GENERAL MEETING IN PICTURES
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TelOneendeavourstocontributetothecountry'seconomicdevelopmentthroughresponsiblebusinesspracticeswhichincludetimelypaymentoftaxandotherstatutoryobligations.Overtheyear2017,TelOnecontributedatotalof$29millionintaxes.Severalinitiativestosupportentreprenuershipandjobopportunitiesforcommunitieswereundertaken.Through theNationalBroadbandProject,TelOnealso supported theeaseofdoingbusinessby reducing bandwidth landing costs which translate to cheaper commucation solutions for businesses andindividuals.
Day offices for start-up business
InOctober2017,thecompanylaunchedrenteddayofficestoprovideofficespacetoentrepreneursinneedoflowcostofficespace.ThisinitiativewaslaunchedinHararewithplanstoexpandtoothercitiesinwhichTelOnehasofficespace.ThedayofficeinHararehouses78start-upbusinesseswitha100%spaceoccupancy.
Partnering to support start-up businesses
Thecompanytookdeliberateeffortstosupportyoungentrepreneursandstartupbusinessesthroughpartneringand sponsoring internet connectivity worth over $50,000 to 3 start-up hubs in Harare and Bulawayo. ThepartnershipwithUdugusawatleast600start-upsbenefittingwithatleast20maturingtobecomefullyfledgedbusinessesin2017.
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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EMPLOYMENT CREATION
The company created more than 1,000 jobs for young people across the country. The opportunities availedincludedBrandAmbassadorroleswhichgaveyouthsanopportunitytolearnandcontributetothedevelopmentoftheeconomy.
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
Youngpeopleemployedasbrandambassadorsgoingthroughorientation
SomeofthemembersfromEsigodinicommunitycontractedduringtheimplementationoftheBulawayo-BeitbridgeBackboneproject
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RESPONSIBILITY TO COMMUNITY AND ENVIRONMENT
In2017, TelOne committed to invest 1%of its revenue towards social investmentprogrammes throughwhichit supports various communitydevelopment initiatives.The1% is inaccordancewithGovernment’sCorporateGovernanceframework.Itistothisendthatallprogrammeslaunchedin2016werecarriedforwardinto2017withafewmoreadditionalinitiativeswhichwillrununtiltheendofthecurrentstrategicperiodin2019.
To further assert the company’s responsibility to the community we serve, TelOne has also transformed itsoperationstoensurethatitcomplieswithbestpracticesaroundpollutionprevention,biodiversityandresourceconservation–conceptswhichhavebeeneffectivelyintegratedintoall-roundbusinessdecisionmakingandtheoperation.TheCSIdrivehasalsodeliberatelyfocusedonaddressingtheneedforTelOnetogainmarketshareandderiverevenuesfromthecommunitieswhicharebeingtargeted.
Programme Summary
Intervention Details Impact to Community
Provide-a-Bin • 1,000binsdonated• Totalcost$38,000
• 2millionresidentsimpacted• 4localauthoritiesbenefitting
Add-a-Brick • $23,000donatedforAfricaUniversityLibraryproject
• 7,500studentsbenefitting
EnvironmentalRehabilitationProgramme
• 56,000treesprocured• Totalcostof$12,500
• 25districtsbenefitting
CommunityHealth • BendeCommunityClinicconstructed• Totalprojectcost$40,000• 10wheelchairsdonatedtoNyanga
Hospitalatacostof$2,000
• 10,000peoplefrom4wardstobenefit
GirlsMentorship • 100younggirlsweretakenthroughajobshadowingandmentorshipprogramme.
• 100girlsfromlessprivilegedbackgroundsbenefitted
Employementcreationandyouthempowerment
• 500youthsemployedasbrandambassadors
• 3,000contractworkersfromcommunitiesengagedduringimplementationoftheNBBproject
• 3,500jobscreated
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GOVERNANCE
SUSTAINABILITY
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Provide-A-Bin
Thisprogrammerunsundertheenvironmentalresponsibilitytheme,wherethecompanyisonadrivetosupportcleaningofZimbabwe’stownsandcitiesthroughtheprovisionoflitterbins.In2017,atotalof1,000binsvaluedat$38,000weredonatedtoBeitbridge,VictoriaFalls,Esigodini,ChinhoyiandKaribalocalauthorities.
TheprogrammeisdriventhroughtherecyclingofmaterialsrecoveredfromTelOneoperationsandsomesourcedfrom other corporate partners. The bins are manufactured using in-house skill at our factory in Msasa andTopyardinBulawayo.Beyondbeingusefultothecommunity,theprogrammehasalsoensuredtheenvironmentalsustainabilityofouroperationwhererecyclinghasbeenemployedtomanageourwastedisposal.
Add-A-Brick
Universityeducation iskey to thecountry’sdevelopmentandhaswitnesseda tremendousgrowth in thepastdecade.Thisgrowthcoupledwiththedevelopmentintechnologyhasseenanincreaseinthesector’sdemandofTelOneproductsandservices.HighereducationhasthusbecomeakeyfocusareafortheTelOnebusiness.IthasthereforebecomeimperativeforTelOne’ssocialinvestmentstoberelevantinthisspace.ThecompanyhasthusbeensupportinginfrastructuredevelopmentinTertiaryInstitutionswithBinduraUniversityLibrary,HarareInstitute of Technology Laboratory projects having benefitted from the programme in 2016. For 2017, a total$23,000wasputforwardtosupporttheAfricaUniversityLibraryupgradeproject.
Environmental Rehabilitation Programme
TelOnehas taken full responsibilityof its contributiontoenvironmentaldegradationthroughtrenching,bushcutting,carbonemissionsandaccumulationofwaste.
Tothisend,aprogrammetowardsintenseenvironmentalreclamationinallareaswhereouroperationshaveanimpactontheenvironmenthasbeenputinplace.Theprogramme entails reforestation targeting to plant200,000 trees over the next 4 years, recycling paperandelectronicwasteoverandabovethecurrentanti-littering and litter bin donation campaign. The treeplanting programmewas launched in Esigodini alongtheBulawayo-BeitbridgeBackboneFibreRoute.Atotalof56,000 treeseedlingsweredistributed forplantingcountrywide where the planting was devolved toTelOne’soperationalRegionsofHarare,NorthernandSoutherneachwithaspecificquarterlytarget.
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SUSTAINABILITY
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Community health
TelOnehasaddedHealthasoneofitsthematicareasoffocus,asaresponsetoemergingcommunityneeds.Undertheprogramme,thecompanyistargetingtosupportconstructionofhealthfacilitiesindisadvantagedcommunitiesaswellastheprovisionofconnectivityandsuppliesthereof.
Undertheprogramme,$40,000waschannelledtowardstheconstructionofasatelliteclinicforBendeCommunityinNyangaDistrict.Furthermore,10wheelchairsweredonatedtoNyangaGeneralHospitalin2017.Plansareinplacetosupporthospitalsandclinicsin2018.
Empowerment and Employment Creation
The Company acknowledges its responsibility tocontribute to national development and has takendeliberateeffortstocreateemploymentopportunitiesbeyonditsconnectivityprovisionroleunderZIMASSET.Anumberofprogrammesandprojectsweredevelopedmanaging to create at least 3500 short term jobs foryouth,womenandmembersfromthecommunitiesatacostof$1million.
Undertheprogramme,individualdevelopmentthroughtraining,mentoring,coachingandjobmarketexposurewas imparted to participating youths while men andwomenwereabletoearnlivelihoodsupportfromthejobscreated.
Mentor a student: Uplifting the Girl Child
TelOnetooktheinitiativetopromotethedevelopmentof the girl child through career guidance,mentorshipandjobshadowingforhighschoolgirls.Furthereffortsinclude deliberate targeting of female students fortrainingopportunitiesattheTelOneCentreforLearning.
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GOVERNANCE
SUSTAINABILITY
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ANNEXURES
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The company has identified leadership, talent andculture as strategic human resource pillars. Thesestrategicpillarswillcontinuetoreceiveattentioninthecompany’s strategic planning process as they providethecontextinwhichemployeesandthecompanycansustainablydevelop.
INDUSTRIAL RELATIONS
Duringthecourseoftheyear,thecompany’sindustriallabourrelationsremainedstable,reflectingthebenefitsof the discourses and open communication betweenmanagement and staff on welfare and productivityconcerns.Thecompanyhasput inplaceacontinuousengagement process to allow reviewof conditions ofserviceforouremployees.Theseengagementstogetherwith other performance management tools havecontributed to an improved employee engagementindexof49.6%from36.8%in2016.Wearecommittedtofurtherimprovingouremployeeengagementindexto60%by2019.
OUR WORKFORCE IN NUMBERS
The number of permanent employees has declinedovertheyearsfrom2,215in2013to1,907in2017.Thedecline has been achieved through natural attrition.Thecompanyhasatechnologyroadmapwhichwillleadtofurtherreductions inheadcount,thiswillhoweverbeachievedthroughnaturalattrition.
PERFORMANCE MANAGEMENT
Thecompanyhasinplaceaperformancemanagementsystemwhichwas developed from the Results BasedPerformanceManagementSystem.Underthissystem,all employees have a performance contract andtheir performance is reviewed quarterly against this
performancecontract.Thishasledtoa5%improvementinourproductivitylevelsfrom$58,160inrevenueperemployeein2016to$61,170in2017asshownbelow:
TRAINING AND DEVELOPMENT
The company is focused on the training anddevelopmentofitsworkforceasthisisoneofthekeydrivers for the long term sustainability of operations.During the year, various training interventions wereimplementedresultinginanaverageof3.8daystrainingperemployeeagainstatargetaverageof5daystrainingperemployeeperannum.
Training initiativesweredesigned to support theeverchangingbusinesstrendsintermsofskillsrequiredtosupportour changing infrastructureand toenableanefficientservicedelivery.
PRE-RETIREMENT TRAINING
Inabidtoensureouremployeesarepreparedforlifeafter employment, the company introduced a pre-retirement planning training programme in 2014.Since the launch of this program, 1,625 current andformeremployeeshavereceivedtrainingonretirementplanningasdemonstratedbelow:
0%
10%
20%
30%
40%
50%
60%
2017 2016 2015
Employee engagement index
56,000
57,000
58,000
59,000
60,000
61,000
62,000
Annual Productivity
Productivity per employee (US$)
2017 2016
0%10%20%30%40%50%60%70%80%90%
0
100
200
300
400
500
600
2014 2015 2016 2017 2018
Pre - retirement training
Qualifying Staff Actual Trained % trained
445 438 404
1,462 1,523 1,576
0200400600800
10001200140016001800
2017 2016 2015
TelOne Employees
Female Emloyees Male Employees
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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WELLNESS PROGRAMMES
Thecompanyiscommittedtoprotectingthehealthandsafetytoallitsemployeesandhastakentheresponsibilitytoadvancesportingandhealthawarenessprogrammes.
Wellness through Sport
Duringtheyear,thecompanyhelditsannualManagingDirector'ssportsgalainGweru.Theeventbroughttogether620membersofstafffromallofourregionsinthecountry.Thesportingeventfocussedonthefollowingsportingdisciplines;football,netball,athletics,volleyballandchessamongothers.
Staff Wellness Programme
Thecompanyholdsanannualwellnessfairinwhichemployeesreceivefreemedicalscreeningandconsultationforvariousailmentsandconditionswhichincludediabetes,hypertension,cancerandHIV.Morethan1,487employeesparticipatedinthisyears’wellnessfairwhichwasheldinallofthecountry’smajorcities.
Lost Time through Injury
The company is committed to ensure a safe working environment in which no employees are injured. Thiscommitmenthas ledtothecreationofacommitteeresponsibleforoverseeingSafetyHealthandEnvironmentissuesattheworkplace.ThiscommitteereportsintotheRiskManagementCommittee.
OurlosttimethroughInjuryindaysreducedfrom10daysin2016to9daysin2017.Thiswasachievedthroughtrainingofallourstaffincludingsupervisorsandcontractemployeesonsafetyrequirementsattheworkplace.
OVERVIEW
GOVERNANCE
SUSTAINABILITY
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Thetablebelowdemonstratesourperformancesummaryasasustainableandresponsiblebusiness.Thesemetricsdemonstratetheimpactofourvariousbusinesssustainabilityinitiatives.
Performance Pillar Performance Target 2017 performance 2016 performance
Our customers
Increasecustomersatisfactionandachieveacustomersatisfactionindexof90%
75% 60%
Attendtonewserviceinstallationswithinanaverageof24hours
21.29hours 19hours
Attendtoclientservicefaultswithinanaverageof24hours
68% 63%
Increaseservicereliabilityandachieveanetworkuptimeof99.95%
99.94% 99.90%
Our environment
50%ofemployeestoparticipateincleaningtheenvironmentweoperatein
50% 50%
Plantatleast10,000treesperannumtoreverseeffectsofouroperationsontheenvironment
56,000treeseedlingsweredistributedacrossthecountry
-
Distribute2,000binsperannumtoatotalof12townsandcities,toimprovesanitationandhygienefor5millionZimbabweansperannum
1,000binsdonatedto5localauthorities
1,500binsdonatedto5cities
Our communities
Toimprovethelivelihoodsofruralcommunitiesbysupportingprovisionofhealthservices
1communityclinicconstructed
Wheelchairsprovidedtoonehospital
Newprogramme
Increasethenumberofruralbroadbandconnectionstoschoolsandclinics
1,375connections 1,352connections
Communityemploymentopportunitiescreatedthroughprojects.
3,500 6,500
Numberofuniversitystudentsrecruitedforworkrelatedlearning
183 134
ContributetothedevelopmentofeducationalfacilitiesbyinvestingatleastUS$50,000perannuminaidingthedevelopmentofinfrastructureateducationalinstitutionsinthecountry.
US$30,000 US$100,000
Our employees
Achieve5trainingdaysperyear 3.8days 4.2days
Rateofstaffturnover 4% 3%
Eliminatetimelostthroughinjuriesattheworkplace(LTIdays)
9days 10days
Improveaworkcultureindexscoreto4outof5
2.67 1.84
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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1. Introduction
TheTelOneEnterprise-wideRiskManagementstrategyhasbeendevelopedwithaviewtobuildbusinessresiliencepremisedonmanagingdownsideriskswhiletakingadvantageofupsiderisks.
The Enterprise RiskManagement (ERM) is anchored on six pillars uponwhich performance ismonitored andmeasured;thesearecompliance,financial,reputational,strategic,technologicalriskandoperationalrisks.
TelOnehasadoptedISO31000soastostandardisetheERMpracticeintheorganisation.
TelOnecontinuedtoendeavourtoidentifyrisksandtakeadvantageofopportunitiesinordertoachievefinancialperformance and ultimately increase shareholder value in the year under reviewby putting in place effectiveresilientriskmanagementstrategies.
2. Overview of the company risk profile
2.1 Telecommunications sectorial analysis
Thetelecommunicationssectorhasbeencharacterisedbythefollowingintheperiodunderreview:
Increase in internet and data usage complementing the company's strategic investment into networkmodernisation.
Decline infixedvoicerevenuewhichtheorganisation ismanagingthroughadaptingtonewcustomertastespremisedonbroadbandservices.
IncreasedcompetitionfromOverTheTopservices(OTTs)hasincreasedconsumerchoiceshencetheinvestmentintodatainfrastructure.
Technologychangesincludingtheever-growingInternetofEverything(IoE),blockchaintechnology,bigdataandartificialintelligencepresentgrowthopportunitiesfordatadrivenvalueaddedservices.
2.2 Risk Management Process
Inordertomanagerisk,TelOnehasestablishedafourstagedriskmanagementprocessasfollows:
BusinessActivities and
Plans
Identifyrisks
QuantifyRisks
Identify andimplement counter
measures
Monitorand
Review
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Risksidentifiedareassessedonthebasisoftheirlikelihoodandimpacttothecompany’soperations.Managementoversightandcontrolsarethereafterappliedinlinewiththeprioritisationcriteria,withtherisksbeingratedhigh,moderateorlow.
2.3 Highlights of 2017 Risk Management Activities
Risk Management initiatives undertaken during the financial reporting period were aimed at improving ourcompanywideawarenessofrisksfacingthebusinessbyundertakingthefollowinginitiatives:
Information SecurityAwareness Programwas launchedwith theobjectiveof raising awareness of potentialinformationsecurityrisksemanatingfromthemodernisedIPnetwork.Atotalof652employeesweretrainedenterprise-wideandallemployeesweretestedoninformationsecurityawareness.
Aregionalriskmanagementtrainingprogramwasdoneto increaseawarenessandembedriskmanagementin day to day business activities. This has assisted in timely identificationof risks and opportunities for thecompany.Thetotalnumberoftrainedemployeeswas305.Plansareinplaceforcontinuedtrainingtocoverallemployeesin2018.
Enterprise-wideriskappetitethresholdswerereviewedinlinewiththechangingenvironment. TheERM function strategically increasedengagements andprominence in customerexperienceand servicequalityprocesses.
EstablishmentoftheTelOneCorporateReputationRiskQuotient,identifyingdriversandeffectivestrategiesforcontinuousimprovement.
Riskmanagementcommitteemeetingsintheperiodunderreviewhaveresultedincontinuedseniormanagementoversightinkeyriskissuesandopportunities.
2.4 Highlights of 2018 Risk Focus Areas
AreasoffocusforRiskManagementin2018areasfollows:
IncreasedfocusonServiceQualityinordertocontinuouslyimprovecustomerexperienceatallcustomertouchpoints.
IncreasedfocusonInformationSecurityRisksduetoincreasedcybersecuritythreatsoncorporatesgloballyandevolutionofournetworkintoamodernIPbasednetwork.
OVERVIEW
GOVERNANCE
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FINANCIALPERFORMANCE
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3. DETAILED RISK REPORT
Below are the detailed specific activities and actions taken to mitigate the risks and realise any associatedopportunities.
3.1 Strategic Risk
StrategicRiskreferstothecurrentandprospectivevolatilitytothecompany'searnings,capitalorbusinessviabilityarising fromadversebusiness decisions and implementationof strategieswhich are inconsistentwith internalfactorsandtheexternalenvironment.
Impact What changed? Risk Mitigation
Decliningvoicerevenues. Changing customer preferencesand tastes affecting our productsandservicesdemandtrendsduetoanincreaseinOTTservices
Transformingcoststhroughvariouscostcontainmentinitiatives.Thishasresultedina6%declineinouroperatingcostsbetween2016and2017.
Increasedcapacitytoofferbroadbandserviceshasledtogrowthinbroadbandrevenue.
3.2 Operational Risk
Operationalriskistheprospectoflossresultingfrominadequateorfailedprocedures,systemsorpolicies.Employeeerrors,systemsfailures,fraudorothercriminalactivityandanyeventthatdisruptsbusinessprocesses.Operationalrisk sourcesmay be internal or external to the company and are usually generated by people, processes andtechnology.
Impact What changed? Risk Mitigation
3.2.1Servicedisruptionduetounsettledobligations
Service disruption due tounsettled foreign accountspayables. This will affectthemajorityofGovernmentcommunicationsystems.
Thecompanyhasnotbeenabletoaccess foreign currency to settleforeignsupplierswhoareowedanaggregateof$25million.
ContinuedengagementswiththeReserveBankofZimbabweforforeigncurrencyallocations.
3.2.2Servicedisruptionduetonetworkvandalism
The company is exposedto service disruption dueto acts of vandalism on itscopperinfrastructure.
There has been an increase incases copper cable theft from thenetwork.Thishashadanimpactoncustomerexperience.
Increasedsurveillance,networkfortificationandrehabilitation.
Increasedstakeholdercollaborationandengagement.
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3.3 Compliance Risk
Thisisariskthatoccursduetoexposuretolegalpenalties,financialforfeitureandmateriallossanorganisationfaceswhen it fails toact inaccordancewith industry lawsandregulations, internalpoliciesorprescribedbestpractices.
3.3.1 Legacy Loans
Impact What changed? Risk Mitigation
TelOne’sbalancesheetistechnicallyinsolventduetolegacyloansof$377million.Thecompanyhasnocapacitytoservicetheseloans.
Thecompany’sprofitabilitycontinuestobeaffectedbythelegacyloanexpendituremadeupofexchangelossesandinterestexpenseamountingto$29million.
Balancesheetrestructuringoptionsarebeingpursuedwiththeshareholder.
3.3.2 Pension Fund
Thebusinessowes$28milliontoitsdefinedbenefitpensionfundasat31December2017.
Impact What changed? Risk Mitigation
Increasedpensionarrearsandliabilities
Theobligationisoutstandingasat31December2017.
Negotiationsareunderwaywithvariousstakeholderstorestructurethisobligation.
3.4 Financial Risk
Therisksattributedtoahighcoststructure,liquidityandsolvencyrisksdescribedabove,creditrisksandforeignexchangerisk.
3.4.1 Credit Risk
CreditriskmainlyrelatestoTelOne’sabilitytotimelyrecoveritsdebtor’sbook
Impact What changed? Risk Mitigation
Delayedrecoveryofthecompany’sdebtor’sbookmayresultincashflowchallenges’whichmayaffectthecompany’abilitytotimelyserviceitsshorttermobligations.
Thecompany’snetdebtor’sbookisvaluedat$149million.Thisamountincludes$88millionowedbyGovernmentDepartments,MinistriesandParastatals.
Prepaidserviceshavebeenintroducedtominimisecreditriskfromresidentialandcorporateclients.
NegotiationsareunderwayforsetoffarrangementswithGovernmentandParastatals.
Interestisbeingchargedtoencourageearlysettlementbydebtors.
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3.5 Technology Risk
Thecompanycontinuestotrackcyberandinformationsecurityrisks.
Impact What changed? Risk Mitigation
InformationSecuritybreachesmayaffectcompanyoperations.
Thecompanyhasdevelopedmoreefficientmethodsofpreventingcyber-attacksbyconductingcontinuousvulnerabilityassessments,upgradingdefensetechnologiesandconductinguserawarenesstraining.
InformationSecurityTraininghasbeengivenprominenceatalllevelsofstaff.
Improvedinformationsecurityarchitecturehasbeendeployedintothenetwork.
3.6 Reputation Risk
TelOnedefinescorporatereputationastheperceptionofthecompanyheldbyvariousstakeholderswhoincludecustomers,shareholder,employees,partners,regulatorsandthecommunities.TelOneendeavorstoidentifyandmanagereputationriskstosecuregreaterbrandresilience,marketdifferentiationandproductloyalty.
Impact What changed? Risk Mitigation
Possiblelossofrevenueandclientbaseduetofailuretoupholdservicestandards.
Thecompanyhascontinuedinitsfocustoimprovecustomerexperiencemanagementby:
Standardisingserviceatalltouchpoints
Improvingdocumentationofclientrecords
Thecompanyhasputinplaceenhancedcorporatereputationriskstrategiessuchascontinuousstafftrainingandengagementonissuesaffectingqualityofservice.
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GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
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OUR ACCOLADES
• Winner-BestSociallyResponsibleOrganisationoftheyear2017
• MrsC.Mtasa-BusinessWomanoftheyear
• 1strunnerup-ICTCompanyoftheyear
• Winner-PublicEnterpriseoftheyear
• Winner-Investoroftheyear
Megafest Business Awards
Zimbabwe Investment Authority (ZIA)
Zimbabwe National Chamber of Commerce (ZNCC)
Zimbabwe National Chamber of Commerce (ZNCC)
ZNCC National Annual Business Awards
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Marketers Association of Zimbabwe Super-brands Award 2017• BusinesstoBusinessBrandoftheYear
Zimbabwe Institute of Management• CustomerServiceExcellenceAward-TelOne• 1stRunnerup-Manageroftheyear,PublicService-MrsC.Mtasa
Northern Region Leadership Excellence Awards• Winner-CustomerServiceExcellenceAward• 1stRunnerup-PublicServicesSector-MrsC.Mtasa
Southern Region Leadership Excellence Awards• PublicServicesSectorLeaderoftheyear-MrWingSibanda
Chartered Institute of Project Managers Zimbabwe• ZimbabweProjectManagementAwards2017• 2ndRunnerup-ICTInfrastructureProjects
Institute of People Management of Zimbabwe• Winner-PeopleDevelopmentandImpactAward• 1strunnerup-PeopleDevelopmentoftheYear(2016)Publicsector• 2ndrunnerup-WellnessLeadershipAward
Zimpapers Telecoms Awards• WidestCoverageInternetAccessProvider
Contact Centre Association of Zimbabwe• ServiceExcellenceAwards• 2ndRunnerup-ISPandIAPSector
Public Sector Audit Financial Management Awards• 2ndRunnerup-FinancialTurnaroundoftheyear
Accounting, Auditing and Financial Reporting• 2ndRunnerup-TelOneZimbabwe Digital Awards 2017• BestInternetServiceProvideroftheyear
Buy Zimbabwe Top 100 Brands• BestlocalCorporateBrand
CSR Network Zimbabwe• Winner-ExcellenceinEnvironment
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FINANCIAL STATEMENTS• Director'sresponsibilitystatement• IndependentAuditor'sreport• Annualfinancialstatements
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ACCOUNTING RECORDS AND FINANCIAL STATEMENTS
TheBoardofDirectors is responsible forthemaintenanceofadequateaccountingrecords,preparationoffinancialstatementsandrelatedinformationcontainedintheSustainabilityReport,ensuringthattheyfairlypresentthestateofaffairsandresultsofTelOne’soperations.
EXTERNAL AUDITOR’S ROLE
The company’s external auditor, theOffice of the Auditor General, is responsible for carrying out an independent examination offinancialstatementsinaccordancewithInternationalStandardsonAuditingandreportingonfindings.Theexternalauditors’reportispresentedonpages56-59oftheSustainabilityReport.
SYSTEMS OF INTERNAL CONTROL
TelOne’ssystemsofinternalfinancialcontrolgivereasonableassurancetothereliabilityoffinancialstatements,safeguardassetsandpreventmisstatementstofinancialinformation.
GOING CONCERN
Thefinancialstatementshavebeenpreparedonagoingconcernbasisdespitethecompany’stechnicalinsolvencyposition.TheGoingConcernbasishasbeenconsideredtoremainanappropriatereportingbasisduetoplansthatarebeingpursuedtorecapitalisethecompanybalancesheetandtransformthebusiness.Further,theDirectorsareawareofGovernmentGuaranteesagainstthecompany’slegacyloanbalances.Furtherdisclosureonthecompany’sgoingconcernhasbeenmadeinnote26tothefinancialstatements.
ACCOUNTING STANDARDS AND POLICIES
Relevant International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) have been applied in thepreparationofthefinancialstatementsfortheyearended31December2017.Thecompany’saccountingpoliciesarebeingcontinuouslyreviewedin linewiththecompanystrategyandchangestoreportingguidelines.Thecompanyhashoweverconsistentlyapplied itspoliciesfromthedateofthelastSustainabilityReport.
APPROVAL OF FINANCIAL STATEMENTS
Thefinancialstatementsfortheyearended31December2017assetoutunderpages60-83fairlypresentinallmaterialrespectsthefinancialpositionandperformanceofTelOne(Private)LimitedandhavebeenapprovedbytheBoardofDirectors.
DIRECTOR’S RESPONSIBILITY STATEMENT
C. MAUNGANIDZE C. MTASA J. MACHOBAActingDirectorFinance,ACISRPAcc ManagingDirector BoardChairman
4 June 2018
REPORT OF THE AUDITOR-GENERAL
TO
THE MINISTER OF INFORMATION COMMUNICATION TECHNOLOGY AND CYBER SECURITY
AND
THE BOARD OF DIRECTORS
IN RESPECT OF THE FINANCIAL STATEMENTS FOR
TELONE (PRIVATE) LIMITED
FOR THE YEAR ENDED DECEMBER 31, 2017
Report on the Audit of the Financial Statements
Opinion
IhaveauditedthefinancialstatementsofTelOne(Private)Limitedsetoutonpages60to83,whichcomprisethestatementoffinan-cialpositionasatDecember31,2017,andthestatementofprofitorlossandothercomprehensiveincome,statementofchangesinequityandstatementofcashflowsfortheyearthenended,andnotestothefinancialstatements,includingasummaryofsignificantaccountingpolicies.
Inmyopinion,theaccompanyingfinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionofTelOne(Private)LimitedasatDecember31,2017,anditsfinancialperformanceanditscashflowsfortheyearthenendedinaccordancewithInterna-tionalFinancialReportingStandards(IFRSs).
Basis for Opinion
IconductedmyauditinaccordancewithInternationalStandardsonAuditing(ISA)andInternationalStandardsofSupremeAuditIn-stitutions(ISSAI).MyresponsibilitiesunderthosestandardsarefurtherdescribedintheAuditor’sResponsibilitiesfortheAuditoftheFinancialStatementssectionofmyreport.IamindependentofTelOne(Private)LimitedinaccordancewiththeethicalrequirementsthatarerelevanttomyauditofthefinancialstatementsinZimbabwe,andIhavefulfilledmyotherethicalresponsibilitiesinaccordancewiththeserequirements.IbelievethattheauditevidenceIhaveobtainedissufficientandappropriatetoprovideabasisformyopinion.
Material uncertainty related to going concern
Withoutqualifyingmyopinion,Idrawattentiontonote26inthefinancialstatementswhichshowsthattheCompanyhadanetliabilitypositionofUS$144,207,033(2016:US$111,194,861)asatDecember31,2017.Fixed-termborrowingsapproachedmaturitywithoutrealisticprospectsofrenewalorrepayment.TheseconditionsindicatetheexistenceofamaterialuncertaintythatmaycastsignificantdoubtabouttheCompany’sabilitytocontinueasagoingconcern.
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Key Audit Matters
KeyAuditMattersarethosemattersthat,inmyprofessionaljudgment,wereofmostsignificanceinmyauditofthefinancialstatementsofTelOnefortheyearendedDecember31,2017.ThesematterswereaddressedinthecontextofmyauditoftheTelOnefinancialstatementsasawholeand,informingmyopinionthereon,andIdonotprovideaseparateopiniononthesematters.Inadditiontothematterdescribedinthe‘MaterialUncertaintyRelatedtoGoingConcernsection’,Ihavedeterminedthemattersdescribedbelowtobethekeyauditmatterstobecommunicatedinmyreport.
Key audit matter How the matter was addressed in the audit
Valuation of property, plant and equipment.Refer to note 3.1 and 4 of the financial statements.
ThecarryingamountoftheCompany’sproperty,plantandequipmentasatDecember31,2017was$279,031,373andtherelateddepreciationchargefortheyearendedDecember31,2017was$22,840,208.Thecarryingamountanddepreciationratesarereviewedannuallybymanagementwithreferencetocurrentandforecastandrelevanttechnicalfactors.Thisinvolvesasignificantdegreeofmanagementjudgementandassumptions.
Reassessmentofusefullivesanddeterminationofdepreciationratesrequiressignificantmanagementjudgementthereforevaluationofproperty,plantandequipmentwasconsideredakeyauditmatter.
Myproceduresinrelationtomanagement’sassessmentofthevaluationofproperty,plantandequipmentincluded:
• Evaluatingmanagement’sestimatesregardingusefullivesandresidualvaluesoftheseassetsinrelationtotheCompany’shistoricalexperience,industrypracticeandfutureoperatingplans.
• Discussionswithmanagementandinspectionofdocumentaryevidenceofthestateoftheassets.
• AssessingthemethodologyusedbymanagementtoestimatetheusefullifeoftheassetstakingintoaccounttheCompany’sfutureplans.
• Evaluatingthecapabilitiesandthecompetenciesofthemanagementtechnicalteam.
Basedontheevidencegathered,Ifoundmanagement’sassumptionsinrelationtousefullifeandcarryingamountreasonableandthedisclosuresinnote3.1and4areconsideredtobeappropriate.
Valuation of Investment property.Refer to note 5 of the financial statements.
Theinvestmentpropertyportfoliohascommercialpropertyleasedtothirdpartiesandacquiredthroughset-offarrangements.Leaseshadvariedrunningperiodsandrenewalsarenegotiatedwiththeleasee.Contingentrentalsarechargeableforallthetenantsequivalenttoamonthlyrentalcharge.Owneroccupancyislessthan20%ofthetotalleasableareaforallthebuildingsclassifiedasinvestmentproperty.ThefairvalueoftheinvestmentpropertywasdeterminedtobeUSD$1,899,649.
Myproceduresinrelationtomanagement’sassessmentofthevaluationofInvestmentProperty:
• Evaluatingmanagement’sestimatesregardingthevaluationofinvestmentproperty.
• Discussionswithmanagementandinspectionofdocumentaryevidenceofthestateoftheassets.
• Assessingthemethodologyusedbymanagementtoestimatethevalueofinvestmentproperty,takingintoaccounttheCompany’sfutureplans.
• Evaluatingthecapabilitiesandthecompetenciesofthemanagementtechnicalteam.
Basedontheevidencegathered,Ifoundmanagement’sassumptionsinrelationtousefullifeandcarryingamountreasonable.Therelateddisclosuresareconsideredtobeappropriate.
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Key audit matter How the matter was addressed in the audit
Revenue recognition.Refer to notes 3.10 and 17 of the financial statements.
TheCompanyrecognisedrevenueamountingtoUS$116,701,488duringtheyearendedDecember31,2017.
The Company has various products that cut across internet,voiceanddatafromwhichitgeneratesrevenueusingacomplexITbasedbillingsystem.Thehugevolumeoftransactionsfromnumerousrevenuestreamsresultsinrevenuerecognitionbeingacomplexarea.Thelevelofcomplexityandthepresumedriskinrevenuerecognitionwereconsideredtobeofmostsignificancetotheaudit.
The audit procedures to address the risk ofmaterial misstatementrelatingtorevenuerecognitionincluded:
• TestingofcontrolsovertheCompany’sinformationtechnologyrevenuesystemassistedbymyinformationtechnologyspecialist.
• Conductingsubstantiveanalyticalproceduresonrevenue.
• Scrutinisingmanual journals related to revenue to assess thetimingandfairvaluesofrevenuerecorded.
• Evaluatedtheadequacyofthedisclosuresregardingrevenue.
Based on the transactions tested, I found nomaterial errors in thecomputationandrecognitionofrevenue.Therelevantdisclosuresareconsideredtobeappropriate.
Valuation of trade receivables. Refer to notes 3.8, 3.8.1 and 9 of the financial statements.
Managementhasestimated the recoverableamountof tradereceivablestobe$161,589,181asatDecember31,2017afterrecognisinganallowanceforcreditlossesof$87,004,690.
Thevaluationoftradereceivablesisdependentoncertainkeyassumptions that requiresignificantmanagement judgement.Asa result, thevaluationof receivableswassignificant tomyaudit.
My audit procedures to address the risk of material misstatementrelatingtothevaluationoftradereceivablesincluded:
• Assessment of the recoverability of material long outstandingreceivablesbymakingcomparisonoftherateofcollectioninthecurrentyearandprioryear.
• Analysisofthedebtors’ageforthelongoutstandingamountsandreasonabilityofprovisionforirrecoverableamounts.
• The assessment of the allowance for credit losses made bymanagementtotestforadequacy.
• Ascertain the adequacy of the allowance for credit losses, Iperformedanindependentassessmentandcomparedmyresultstothemanagementestimates.
• Evaluationofthereasonabilityofmanagementjudgementsandassumptionsmadeinestimatingtheallowanceforcreditlossesconsideringthenatureandsuitabilityofanyhistoricdatausedtosupporttheseassumptions.
IfoundthekeyassumptionsusedinthevaluationoftradereceivablestobeappropriateandIdidnotidentifymaterialissueswithadequacyofallowanceforcreditlosses.
Other information
ThedirectorsareresponsiblefortheOtherInformation.TheOtherInformationcomprisesalltheinformationintheCompany’sannualreportanddoesnotincludethefinancialstatementsandmyauditor’sreportthereon.
MyopiniononthefinancialstatementsdoesnotcaterfortheOtherInformationandIdonotexpressanyformofassuranceorconclusionthereon.
InconnectionwithmyauditoftheCompany’sfinancialstatements,myresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththefinancialstatementsormyknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.
If,basedontheworkIhaveperformedontheotherinformationthatIobtainedpriortothedateofthisreport,Iconcludethatthereisama-terialmisstatementofthisotherinformation,Iamrequiredtoreportthatfact.Ihavenothingtoreportinthisregard.
Responsibility of Management and those charged with governance
TheCompany’sDirectorsareresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithInterna-tionalFinancialReportingStandards(IFRS)andinamannerrequiredbytheCompaniesAct[Chapter24:03],andforsuchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.
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Inpreparingthefinancialstatements,DirectorsareresponsibleforassessingtheCompany’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlessmanagementeitherintendstoliquidatetheCompanyortoceaseoperations,orhasnorealisticalternativebuttodoso.ThosechargedwithgovernanceareresponsibleforoverseeingtheCompany’sfinancialreportingprocess.
Auditor’s responsibility for the audit of the financial statements
Myobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesmyopinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAwillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.
AspartofanauditinaccordancewithISAs,Iexerciseprofessionaljudgementandmaintainprofessionalskepticismthroughouttheaudit.Ialso:
Identifyandassesstherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisformyopinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol;
Obtainanunderstandingofinternalcontrolsrelevanttotheauditinordertodesignauditproceduresthatareappropriateinthecircum-stances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany’sinternalcontrol;
Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebythedirectors;
Concludeontheappropriatenessofthedirectors’useofthegoingconcernbasisofaccountingandbasedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtontheCompany’sabilitytocontinueasagoingconcern.IfIconcludethatamaterialuncertaintyexists,Iamrequiredtodrawattentioninmyauditor’sreporttotherelateddisclosuresinthefinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifymyopinion.Myconclusionsarebasedontheauditevidenceobtaineduptothedateoftheauditor’sreport.However,futureeventsorconditionsmaycausetheCompanytoceasetocontinueasagoingconcern;
Evaluatetheoverallpresentation,structureandcontentofthefinancialstatements,includingthedisclosures,andwhetherthefinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.
Icommunicatewiththosechargedwithgovernanceregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatIidentifyduringmyaudit.
IalsoprovidethosechargedwithgovernancewithastatementthatIhavecompliedwiththerelevantethicalrequirementsregardinginde-pendence,andtocommunicatewiththemallrelationshipsandothermattersthatmayreasonablybethoughttobearonmyindependence,andwhereapplicable,relatedsafeguards.
Fromthematterscommunicatedwiththosechargedwithgovernance,Ideterminethosemattersthatwereofmostsignificanceintheauditofthefinancialstatementsofthecurrentperiodandarethereforethekeyauditmatters.Idescribethesemattersinmyauditor’sreportunlesslaworregulationprecludespublicdisclosureaboutthematterorwhen,inextremelyrarecircumstances,Ideterminethatamattershouldnotbecommunicatedinmyreportbecausetheadverseconsequencesofdoingsowouldreasonablybeexpectedtooutweighthepublicinterestbenefitsofsuchcommunication.
Report on Other Legal and Regulatory Requirements
Inmyopinion,thefinancialstatementshave,inallmaterialrespects,beenproperlypreparedincompliancewiththedisclosurerequire-mentsoftheCompaniesAct[Chapter24:03],thePublicFinanceManagementAct[Chapter22:19]andrelevantStatutoryInstruments.
7 June 2018
M. CHIRI (MRS)
AUDITOR – GENERAL
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Tel-One (Private) Limited 2017 Sustainability Report
60
STATEMENT OF FINANCIAL POSITIONasat31December2017
Audited Audited 31 Dec 2017 31 Dec 2016 Note USD USD
ASSETS Non current assets Property,plantandequipment 4.1 279,031,373 292,395,960Capitalworkinprogress 4.2 56,207,612 14,389,000Investmentproperty 5 1,055,892 1,034,030Intangibleassets 6 27,744,768 20,628,327Availableforsaleinvestments 7 1,358,216 1,048,835 365,397,861 329,496,152 Current assets Inventories 8 9,228,606 8,430,797Non-currentassetsheld-for-sale 4.3 280,986 -Taxreceivable 14.4 2,529,392 2,694,089Tradeandotherreceivables 9 161,589,181 145,537,738Cashandcashequivalents 10 9,348,396 3,585,761 182,976,561 160,248,385 TOTAL ASSETS 548,374,422 489,744,537 EQUITY AND LIABILITIES Capital and reserves Sharecapital 11 32 32Non-distributablereserve (12,791,542) (9,345,589)Availableforsalereserve 648,769 342,482Retainedloss (132,064,292) (102,191,786) (144,207,033) (111,194,861)Non-current liabilities Foreignloans:dueafteroneyear 12 112,379,081 40,351,447Longtermpayable 15.4 4,517,258 17,365,361Deferredtaxliability 14.3 51,707,467 63,140,184Deferredincome 412,469 741,169 169,016,275 121,598,161 Current liabilities Tradeandotherpayables 15 151,885,315 141,112,859Loaninterestpayable 15.3 194,936,204 177,304,128Foreignloans:duewithinoneyear 12 148,517,960 133,332,007Localloans:duewithinoneyear 13.1 25,093,028 25,228,717Provisions 16 3,132,673 2,363,526 523,565,180 479,341,237 TOTAL EQUITY AND LIABILITIES 548,374,422 489,744,537
C.MAUNGANIDZE C.MTASA J.MACHOBA(ActingDirectorFinanceACISRPAcc) (ManagingDirector) (BoardChairman)
4June2018
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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STATEMENT OF PROFIT OR LOSS fortheyearended31December2017
Audited Audited 31 Dec 2017 31 Dec 2016 Note USD USD Revenue 17 116,701,488 114,042,935Paymenttootheroperators 18 (20,304,854) (20,969,400)Net revenue 96,396,634 93,073,535 Otherincome 19 6,455,507 5,425,198Financeincome 21.1 1,797,760 319,901
Operating expenses (84,250,339) (84,920,435)Staffcosts 20.1 (43,946,686) (41,828,777)Otheroperatingexpenses 20.2 (40,303,653) (43,091,658)Earnings before interest, tax, depreciationand armotisation 20,399,562 13,898,199
Depreciationofproperty,plantandequipment 4.1 (22,840,208) (22,872,765)Depreciationofinvestmentproperty 5 (17,970) (17,969)Amortisationofintangibles 6 (4,458,214) (2,634,830)Operating loss (6,916,830) (11,627,365)
Financecostonlegacyloans 21.2 (15,127,219) (17,838,856)Financecostoncurrentloans 21.2 (2,043,928) (1,807,460)Specialexcisedutyonairtime 20.3 (1,270,826) -Netexchangelossesonlegacyloans 22 (14,097,649) (1,435,227)Loss before tax (39,456,452) (32,708,908)
Taxexpense 14.1 9,583,946 7,784,026Loss for the year (29,872,506) (24,924,882)
Audited Audited 31 Dec 2017 31 Dec 2016 Note USD USD Lossfortheyear (29,872,506) (24,924,882) Other comprehensive income - net of tax Impairmentofplantandequipment (3,445,953) -Revaluationadjustment - 12,494,683Items that may be reclassified to profit or loss: -Fairvaluegainonavailableforsaleinvestments 306,287 196,538Total other comprehensive income for the year (3,139,666) 12,691,221 Total comprehensive income for the year (33,012,172) (12,233,661)
STATEMENT OF OTHER COMPREHENSIVE INCOMEFortheyearended31December2017
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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Non Share distributable Available for Retained Total capital reserve sale reserve loss equity USD USD USD USD USD
Balance at January 1, 2016 32 (21,840,272) 145,944 (77,266,904) (98,961,200) Lossfortheyear - - - (24,924,882) (24,924,882)Revaluationadjustment - 12,494,683 - - 12,494,683Fairvalueremeasurementgain - - 196,538 - 196,538Balance at December 31, 2016 32 (9,345,589) 342,482 (102,191,786) (111,194,861)
Balance at January 1, 2017 32 (9,345,589) 342,482 (102,191,786) (111,194,861)Lossfortheyear - - - (29,872,506) (29,872,506)Impairmentonproperty,plantandequipment - (3,445,953) - - (3,445,953)Fairvaluegainonavailableforsaleinvestments - - 306,287 - 306,287Balance at December 31, 2017 32 (12,791,542) 648,769 (132,064,292) (144,207,033)
STATEMENT OF CHANGES IN EQUITYfortheyearended31December2017
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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STATEMENT OF CASH FLOWSfortheyearended31December2017
Audited Audited 31 Dec 2017 31 Dec 2016 Note USD USD
Cash flows from operating activities Operatingloss (6,916,830) (11,627,365) Adjustmentsfor: Depreciationofproperty,plantandequipment 4.1 22,840,208 22,872,765Depreciationofinvestmentproperty 5 17,970 17,969Amortisationofintangibleassets 6 4,458,214 2,634,830DeferredIncome (328,700) (317,423)(Loss)/profitondisposalofproperty,plantandequipment 40,248 (61,964)Unrealisedexchangelosses 22 2,304,133 408,242Financeincome (1,797,760) (319,901) 20,617,483 13,607,153Changes in working Capital Decrease/(Increase)ininventories (797,810) 1,632,226Decrease/(Increase)inreceivables (24,881,809) 203,856Increase/(Decrease)inpayables 5,367,635 18,205,834 Cash generated from operations 305,499 33,649,069 Interestreceived 162,880 133,578Interestpaid (64,846) (416,691)Taxationpaid 14.4 (530,604) (803,160)Net cash from operating activities (127,071) 32,562,796 Cash flows from investing activities Purchaseofproperty,plantandequipment 4.1 (13,857,944) (10,528,082)Purchaseofcapitalworksinprogressequipment 4.2 (47,016,666) (14,389,000)Purchaseofinvestmentproperty 5 (39,832) -Proceedsfromdisposalofplant,equipmentandotherspares 54,561 213,223Intangibleassetdevelopmentexpenditure (7,055,100) (1,561,869)Net cash utilised in investing activities (67,914,981) (26,265,728) Cash flows from financing activities Proceedsfromlongtermforeignborrowings 12 78,630,649 -Repaymentoflocalborrowings 13 (1,615,385) (4,137,879)Repaymentofforeignborrowings (3,210,576) (3,100,410)Net cash inflow/(outflow) from financing activities 73,804,688 (7,238,289) Net increase/(decrease) in cash and cash equivalents 5,762,635 (941,222) Cash and cash equivalents at beginning of the year 3,585,761 4,526,983 Cash and cash equivalents at end of year 10 9,348,396 3,585,761
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017
1. NATURE OF BUSINESS AND GENERAL INFORMATION Tel-One (Private) Limited was incorporated in
Zimbabwe in 2000 in terms of the CompaniesAct[Chapter 24.03] pursuant to the Postal andTelecommunications Act [Chapter 12:05). Thecompany is wholly owned by the Government ofZimbabwe. Tel-One is a fixed mobile convergencecompany whose main business is that of provisionof telecommunication services and products. ThecompanyisregisteredattheRegistrarofCompaniesunderregistrationnumber4658/2000.
Theregisteredofficesandaddress:RunhareHouse 107KwameNkrumahAvenue P.OBoxCY331 Harare
2. BASIS OF PREPARATION 2.1 Authorisation of Financial Statements Thefinancialstatementswereauthorisedforissueby
theTelOneBoardofDirectors.
2.2 Compliance2.2.1 Compliance with IFRS ThefinancialstatementsfortheyearendedDecember
31, 2017 have been prepared in accordance withInternational Financial Reporting Standards (IFRS),International Accounting Standards (IAS) andInterpretations(collectivelyIFRS).
2.2.2 Compliance with Legal and Regulatory requirements
ThefinancialstatementsfortheyearendedDecember31,2017havebeenpreparedinaccordancewiththeCompaniesAct[Chapter24.03].
2.3 Going Concern Basis The financial statements have been prepared on a
goingconcernbasis.Thecompanyisinanetliabilitypositionmainlyduetolegacyloansonthecompanybalancesheet.TheseloanswereincurredduringthePosts and Telecommunications Corporation (PTC)era.TheloansareguaranteedbytheGovernmentofZimbabwe.
Thecompanyhaspreparedthefinancialstatementson the going concern basis as there are plans inplace which are being pursued to recapitalisethe balance sheet and modernise the company’stelecommunications network. These plans areexpected to set the company to profitability. Inaddition,thecompanyhasassetsthatareofstrategicimportancetotheGovernmentofZimbabwe.
The directors are not aware of any other materialuncertaintiesrelatedtoeventsorconditionsthatmaycastsignificantdoubtuponthecompany’sability tocontinueasagoingconcern.
Further disclosures on the legacy loans and goingconcern are included in notes 12 and 26 to thefinancialstatementsrespectively.
2.4 Functional and Presentation Currency The financial statements are presented in United
StatesDollars(USD)whichisboththefunctionalandpresentationcurrency.
2.5 Consistency of Presentation and Accounting policies
The financial statements have retained thepresentation and classification of items from oneperiod to the next, unless a new InternationalFinancialReportingStandards(IFRS)requiresachangeoritisapparentfollowingasignificantchangeinthenature of the business or a review of the financialstatements. Accounting policies have been selectedand applied consistently for similar transactions,othereventsandconditionsinlinewithInternationalFinancialReportingStandards.
2.6 Basis of measurement The financial statements are prepared using the
accrualbasisofaccounting.Materialclassesofsimilaritemsarepresentedseparatelyanditemsofdissimilarnature or function are presented separately unlesstheyareimmaterial.Thefinancialstatementsofthecompany are based on the statutory records thataremaintainedunderthehistoricalcostconvention,exceptforfinancialinstrumentswhicharemeasuredatfairvalueandpropertyplantandequipmentwhicharecarriedatrevaluedcarryingamounts.
2.7 Use of estimates and judgments The preparation of financial statements requires
management to make judgments, estimates andformulateassumptionsthatmayaffecttheapplicationofaccountingpoliciesand the reportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.
Estimatesandunderlyingassumptionsare reviewedon an ongoing basis. They are based on historicalexperienceandother factors including expectationsof futureevents that arebelieved tobe reasonableunderthecircumstances.However,uncertaintyaboutthese assumptions and estimates could require amaterial adjustment to the carrying amount of theassetorliabilityinthefuture.Revisionstoaccountingestimatesarerecognised in theperiod inwhich theestimateisrevisedandinanyfutureperiodsaffected.
2.8 Adoption of new and revised Financial Reporting Standards
New standards, amendments and interpretationseffective1 January2017,whichhavebeenadoptedandappliedareasfollows;
i. IAS 7 Statement of Cash Flows Amendments resulting fromthedisclosure initiative
to clarify that entities shall providedisclosures thatenable users of financial statements to evaluatechangesinliabilitiesarisingfromfinancingactivities.
Effectivedate1January2017
2.9 New Standards, Amendments and Interpretations issued but not yet effective and not yet adopted for financial year beginning 1 January 2017
i. IFRS 15 Revenue from Contracts with Customers Thisnewstandardprovidesasingle,principlesbased
five-step model to be applied to all contracts withcustomers.Thefivestepsinthemodelareasfollows:• Identifythecontractwiththecustomer• Identify the performance obligations in the
contract
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
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NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
• Determinethetransactionprice• Allocatethetransactionpricetotheperformance
obligationsinthecontract• Recognizerevenuewhen(oras)theentitysatisfies
aperformanceobligation.
Effectivedate1January2018.
ii. IFRS 16 Leases It establishes principles for the recognition,
measurement,presentationanddisclosureof leaseswith the objective of ensuring that lessees andlessors provide relevant information that faithfullyrepresentsleasetransactions.Thestandardprovidesasinglelesseeaccountingmodel,requiringlesseestorecognizeassetsandliabilitiesforallleasesunlesstheleasetermis12monthsorlessortheunderlyingassethasalowvalue.Lessorscontinuetoclassifyleasesasoperatingorfinanceleases,withIFRS16’sapproachtolessoraccountingsubstantiallyunchangedfromitspredecessor,IAS17.
Effectivedate1January2019
iii. IFRS 17 Insurance Contracts It requires insurance liabilities to be measured at
a current fulfilment value and provides a moreuniform measurement and presentation approachfor all insurance contracts. These requirementsare designed to achieve the goal of a consistent,principle-based accounting for insurance contracts.IFRS17supersedesIFRS4InsuranceContractsasof1January2021.
iv. IFRS 7 Financial Instruments Disclosures Amendments requiring disclosures about the initial
application of IFRS 9. Additional hedge accountingdisclosuresresultingfromtheintroductionofahedgeaccountingchapterinIFRS9.
Effectivedate1January2018
v. IFRS 9 Financial Instruments Replaces IAS 39. In July 2014 IASB issued IFRS 9
FinancialInstruments,thestandardwhichwillreplaceIAS 39 for annual periods beginning on or after 1January 2018 with early adoption being permitted.Fromaclassificationandmeasurementperspective,the standard will require all financial assets exceptequity instruments and derivatives to be assessedbased on a combination of the entity’s businessmodelformanagingtheassetsandtheinstruments’contractualcashflowcharacteristics.
Effective1January2018.
vi. IAS 39 Financial Instruments: Recognition and Measurement
AmendmentstopermitanentitytoelecttocontinuetoapplythehedgeaccountingrequirementsinIAS39forafairvaluehedgeoftheinterestrateexposureofaportionofaportfoliooffinancialassetsorfinancialliabilitieswhen IFRS9 is applied, and toextend thefair valueoption to certain contracts thatmeet the‘ownuse’scopeexception
Effectivedate1January2018
vii. IAS 12 Income Taxes and IFRIC 23 The interpretation addresses the determination of
taxableprofit(taxloss),taxbases,unusedtaxlosses,unused tax credits and tax rates, when there isuncertaintyoverincometaxtreatmentsunderIAS12.Itspecificallyconsiders:• Whether tax treatments should be considered
collectively• Assumptionsfortaxationauthorities’examinations• Thedeterminationoftaxableprofit(tax loss),tax
bases, unused tax losses, unused tax credits andtaxrates
• Theeffectofchangesinfactsandcircumstances
Effectivedate1January2019
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Property, Plant and Equipment Itemsof property, plant andequipment are initially
measuredatcost,lessaccumulateddepreciationandaccumulated impairment. Cost includes purchaseprice and any costs directly attributable to bringingtheassettothelocationandconditionnecessaryforittobecapableofoperatinginthemannerintendedbymanagement.Costalsoincludesthecostofreplacingpartoftheplantandequipmentandborrowingcostsfor long term projects if the recognition criteria ismet.Costsofrepairsandmaintenancearerecognisedinprofitandlossastheyareincurred.
Assets in the course of construction are carried atcost less any recognised impairment. Cost includesprofessional fees, import clearance charges andborrowing costs for qualifying assets. Depreciationfortheseassetsisonthesamebasisasotherassetsandonlycommenceswhentheassetsarereadyforintendeduse.
Property,PlantandEquipmentwhichwerepreviouslycarried at historical cost, are now subsequentlymeasured at fair value at date of revaluationless subsequent accumulated depreciation andaccumulated impairment losses. The change willensurethefinancialstatementsprovidereliableandmorerelevantinformation.Thechangeinaccountingpolicy, being the initial application of the policy torevalue assets, has been dealt with in accordancewithIAS16.
Items of property, plant and equipment aredepreciated using the straight-line method, so asto write off the assets over the anticipated usefullives. The depreciation methods, useful lives andresidual valuesof assets are reviewedandadjustedifappropriateateachreportingdatewiththeeffectofanychangesinaccountingestimateaccountedforonaprospectivebasis.Theusefullifeofthedifferentcategories of property, plant and equipment isestimatedasfollows:
Assetclass Years Buildings 20-40 Telecommunicationsplant 5-20 Storesplant 5-10 Fixturesandfittings 5-20 Transportequipment 3-10 ComputerEquipment 3-5
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An item of property, plant and equipment isderecognised upon disposal or when no futureeconomic benefits are expected from its use ordisposal. The gainor loss arisingon thedisposal orretirementofanassetisdeterminedasthedifferencebetweenthesalesproceedsandthecarryingamountof the asset and is recognised in the Statement ofProfitorLoss.
3.2 Intangible Assets Intangible Assets acquired separately aremeasured
oninitialrecognitionatcost.Thecostsareamortisedover the estimated useful lives using the straightlinemethod. Subsequently they are carried at costless accumulated Amortisation and accumulatedimpairment losses. Amortisation commences whentheintangibleassetsareavailablefortheirintendeduse and is recognised on a straight-line basis overtheir expected useful lives. Intangible assets withindefiniteusefullivesthatareacquiredseparatelyarecarried at cost less accumulated impairment losses.Amortisationceasesattheearlierofclassificationasheldforsaleorde-recognition.
Intangible assets comprise mainly of acquiredcomputersoftware licensesand IndivisibleRightsofUse (IRU),whichare capitalisedon thebasisof thecostsincurredtoacquireandbringtousethespecifiedsoftware,BillingsystemsandSynchronousTransportModule (STMs). Computer software developmentcosts recognised as assets are amortised over theirestimatedusefullivesasfollows:
Intangible Asset Years SAPsoftware 5 Leapbillingsoftware 5 IndefeasibleRightsofUse 20
An intangible asset is derecognised on disposal orwhennofutureeconomicbenefitsareexpectedfromits use or disposal. Gains or losses arising fromde-recognition of an intangible assetmeasured as thedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheassetarerecognisedinprofitorlosswhentheassetisderecognised.
3.3 Investment Property Investment properties are properties held to earn
rentalsorforcapitalappreciationratherthanforusein theproductionor supply of goods or services orfor administrative purposes or sale in the ordinarycourseofbusiness.An investmentpropertyshallbemeasured initiallyatcost.Transactioncostsshallbeincluded in the initialmeasurement. At subsequentmeasurementinvestmentpropertyshallbemeasuredat cost less any accumulated depreciation and anyaccumulated impairment losses. Fair values aredetermined for disclosure purposes in terms of IAS40paragraph32.Fairvaluesaredeterminedbasedonvaluation performed by an accredited independentvaluer. Where valuation is not determined by anindependentvaluerthatfactwillbedisclosed.
An investment property shall be derecognisedon disposal or when the investment property ispermanently withdrawn from use and no futureeconomic benefits are expected from its disposal.The difference between net disposal proceeds andthecarryingamountisrecognisedinprofitorlossintheyearofde-recognition.
3.4 Non- Current Assets Held for Sale Non-current assets held for sale are assets whose
carryingamountwillberecoveredprincipallythroughasaletransactionratherthanthroughcontinuinguse.Theyarecarriedatthelowerofcarryingamountandfairvaluelesscoststosell.ForanassettoqualifyforclassificationunderIFRS5itmustmeetthefollowingconditions:• assetmustbe available for immediate sale in its
presentcondition• itssalemustbehighlyprobable
Definingahighlyprobablesale• Appropriate level of management must be
committed to a plan to sell the asset (e.g.recommendationtodisposeofspecificasset inaboardofsurveyisapprovedatdirectorlevel)
• An active programme to locate a buyer andcompletetheplanmusthavebeen initiated (e.g.advertisingthroughappropriatemediaplatforms)
• Theassetmustbeactivelymarketedforsaleataprice that is reasonable in relation to its currentfairvalue
• The sale should be expected to qualify forrecognitionasacompletedsale withinoneyearfrom the date of qualification (except wherecircumstancesbeyondtheentity’scontrolpreventthis)
3.5 Impairment of Non-Financial Assets Thecompanyateachreportingdateassesseswhether
thereisanindicationthatanassetmaybeimpaired.If any indicationexists,orwhenannual impairmenttesting is required the company estimates therecoverableamount.Recoverableamountbeingthehigheroffairvaluelesscoststosellandthevalueinuseoftheasset.Iftherecoverableamountofanassetislessthanitscarryingamount,thecarryingamountof the asset shall be reduced to its recoverableamountandthatreductionisanimpairmentloss.Animpairment loss shall be recognised immediately inprofitor lossunless theasset is carriedat revaluedamount.Animpairmentlossofarevaluedamountistreatedasarevaluationdecrease.Animpairmentlossis reversed if thereversalcanberelatedobjectivelytoaneventoccurringaftertheimpairmentlosswasrecognised.
3.6 Leases Aleaseisanagreementwherebythelessorconveys
to the lessee in return for a payment or series ofpayments in lieuof the right touseanasset foranagreed period of time. The company classifies asfinanceleasewheneverthetermsoftheleasetransfersubstantiallyalltherisksandrewardsofownershiptothelessee.Leasesthatdonotmeetthefinanceleaserecognitioncriteriaareclassifiedasoperatingleases.Assetsleasedintermsofafinanceleaseagreementarecapitalisedatamountsequal,at lease inceptionto the fair value of the leased asset or if lower atthe present value of theminimum lease payments.Capitalised assets are depreciated in terms of thepolicyapplicabletoproperty,plantandequipment.
3.7 Inventory Inventories are assets held for sale in the ordinary
course of business; or in the process of productionforsuchsale;orintheformofmaterialsorsuppliesto be consumed in the production process or inthe rendering of services. Inventories are valued
NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
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at the lower of cost and net realisable value. Netrealisable value is theestimated sellingprice in theordinarycourseofbusiness lesstheestimatedcostsofcompletionandtheestimatedcostsnecessary tomakethesale.Thecostof inventoriescomprisesallcostsofpurchase,costsofconversionandothercostsincurred inbringing the inventories to theirpresentlocationandcondition.Inventoriesthatthecompanystillcarriesbutwhicharenolongeravailableonthemarket are carried at nil value. The amount of anywrite-down of inventories to net realisable valueand all losses of inventories are recognised as anexpenseintheperiodthewrite-downorlossoccurs.Itemsaccountedforasinventoryincludeinstallationmaterial, maintenance material and networkequipment.
3.8 Trade and Other Receivables Trade and other receivables are measured at their
cost less impairment losses. Trade receivables arecomposed of an extensive customer base, coveringresidential,government,wholesale, localauthoritiesandparastatals.Aprovisionfor impairmentoftradereceivables is established when there is objectiveevidencethatthecompanywillnotbeabletocollectall amounts due according to the original termsof contracts with customers. Significant financialdifficultiesofthedebtor,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisationanddefault or delinquency in payments are consideredindicators that the trade receivables are impaired.Whenatradereceivableisuncollectible,itiswrittenoffagainsttheallowanceforcreditlosses.Subsequentrecoveries of amounts previously written off arecredited against the trade receivables impairmentprovisioninprofitorloss.
3.8.1 Allowance for Credit Losses The company policy applies to all categories of
tradereceivables.Ageneralprovisionandaspecificprovisionfordoubtfuldebtsisregularlycalculatedinrelationtopaymentpatternsofcustomerscontinuallyre-assessing the payment patterns and status ofcreditlimitsavailedtothecustomers.
A provision for doubtful debts is established on anaccountbyaccountbasisforageddebtsgreaterthan90days,takingintoaccount:• Thesizeandnatureofthedebt• Thedebtorinquestion
Ageddebtslessthan90daysmaybeprovidedforiftherecoveryisknowntobeunlikely.
3.9 Financial Instruments Afinancialinstrumentisanycontractthatgivesriseto
afinancialassetofoneentityandafinancialliabilityofanother.Financialassetsandfinancialliabilitiesarerecognisedwhenthecompanybecomespartytothecontractualprovisionsoftheinstrument.
3.9.1 Financial Assets Financialassetsareclassifiedatinitialrecognitionas
financial assets at fair value through profit or loss,loansandreceivables,heldtomaturityinvestments,available for sale financial assets or as derivativesdesignated as hedging instruments in an effectivehedge.
Non derivative financial instruments carried in the
Statement of Financial Position comprise cash andcashequivalents, tradeandother receivables, tradeandotherpayablesandamountsowingtoandfromrelated parties. These instruments are measuredinitiallyatfairvalue,forinstrumentsnotatfairvaluethroughprofitorlossanddirectlyattributablecosts.
3.9.2 Financial Liabilities Financialliabilitiesareclassifiedatinitialrecognition
as financial liabilities at fair value through profit orloss,loansandborrowings,payablesorasderivativesdesignated as hedging instruments in an effectivehedge.Allfinancialliabilitiesareinitiallyrecognisedatfairvalue.Financialliabilitiesofthecompanyincludetradeandotherpayablesandloans.
3.9.3 Provisions Provisions are liabilities of uncertain timing or
amount.Provisionsarerecognisedwhenthecompanyhas a present obligation, legal or constructive, as aresult of past events. It shouldbeprobable that anoutflow of resources embodying economic benefitswillberequiredtosettletheobligationandareliableestimatecanbemadeoftheobligation.Theamountof the obligation shall be the best estimate of theexpenditurerequiredtosettlethepresentobligationattheendofthereportingperiod.Wheretheeffectof thetimevalueofmoney ismaterial, theamountof a provision shall be the present value of theexpenditure expected to be required to settle theobligation.Thediscount rateappliedshallbeapre-taxratethatreflectsthecurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheliability.
3.10 Revenue Revenueisrecognisedtotheextentthatitisprobable
theeconomicbenefitswillflowtothecompanyandtherevenuecanbemeasuredreliably, regardlessofwhenpaymentismade.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.Revenueisfromtheprovisionoftelecommunicationservices,rental,saleandrepairoftelecommunicationequipment.
Thecompanyprovidesthefollowingservices• Fixed broadband solutions through Fibre, ADSL
andSatellite• Leasedinternet• Virtual private networks, point to point data
connections• DataCentreandCloudcomputingServices• Customisedinternetbandwidthsolutions• Backhaulservices• Internetbroadbandwholesale• Interconnectionservices• Publicwi-fi• Voice
3.10.1 Broadband internet The company provides virtual private network and
leased circuit services. Revenue from this serviceincludes installation fees and rental fees for thedataservices.Theserviceispostpaidandrevenueisrecognisedonaccrualbasisthatiswhentheclientisbilledat theendofeachmonth.Revenue fromthisservice is recognised on an accrual basis for eachmonthofsubscription.
NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
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The company also provides internet services in theform of fixed broadband services. The companyprovidesbroadbandconnectivitythroughAsymmetricDigitalSubscriberLine(ADSL)andFibreToTheHome(FTTH). This is a prepaid service and revenue isrecogniseduponusageoronexpirationoftheusageperiod.
The company also offers satellite services that candelivervoice,dataandvideoservices.Theservicecanalso providebroadband via satellite through theKaBandVsat.Satelliteservicesarepostpaidandrevenueisrecognisedonaccrualbasisthatiswhentheclientisbilledattheendofeachmonth.
3.10.2 Voice service The company provides voice telephone services.
Revenue includes installation fees for first timeservice, monthly rentals and usage charges. Theservicecanbeprepaidorpostpaid.
Forthepostpaidservicebilling isdonemonthlyandrevenue is recognised when the client is billed inthemonthofconsumption.Fortheprepaidservice,revenueisbasedonusageoruponexpirationoftheusageperiod.
3.10.3 Sale of Goods Revenuefromthesaleofgoodsshallberecognised
whenallthefollowingconditionshavebeensatisfied:• The entity has transferred to the buyer the
significant risksand rewardsofownershipof thegoods;
• The entity retains neither continuingmanagerialinvolvementtothedegreeusuallyassociatedwithownershiporeffectivecontroloverthegoodssold;
• Theamountofrevenuecanbemeasuredreliably;• Itisprobablethattheeconomicbenefitsassociated
withthetransactionwillflowtotheentity;and• Thecostsincurredortobeincurredinrespectof
thetransactioncanbemeasuredreliably.
3.10.4 Installation and monthly rental fees Installation fees revenue is recognised on date of
serviceconnection.Monthlyrentalsarerecognisedasrevenueastheclientsareprovidedaccesstonetworkbasedontheagreedfixedcharges.
3.10.5 Other Income This is income from non-core activities for the
business. It is income from the sale of goods andservices that are non-telecommunication. Incomefrom the sale of goods is recognised when thesignificant risks and rewards of ownership havepassedtothebuyer.Incomefromthesaleofgoodsismeasuredatthefairvalueofconsiderationreceivedor receivable. Income from services rendered isrecognisedwithreferencetothestageofcompletionofthetransactionatthereportingdate.Otherincomealso includes income from the rental of propertiesandincomefromtrainingservices.
3.10.6 Finance Income This is income earned fromfinancial assets,money
market placements and accounts at financialinstitutions. As a way of encouraging customers tosettle all currentbills ontime interest is nowbeingleviedonalloverdueaccountsinlinewiththeclient
servicecontracts.
3.10.7 Deferred Revenue Revenueisdeferredwhenrevenuehasnotyetbeen
earned. The Company has deferred income arisingfromloananddebtforgivenessagreementswhichareconditional. Revenue is deferredover the period ofcondition.Revenueisrealisedastheconditionismetandthroughprofitandloss.
3.11 Taxation3.11.1 Current tax Currentincometaxassetsandliabilitiesaremeasured
attheamountexpectedtoberecoveredfromortobepaidtothetaxauthorities.Thetaxratesandtaxlawsusedtocomputethetaxamountarethosethatareenactedorsubstantiallyenactedatthereportingdate.
Tax forcurrentandpriorperiodsshall totheextentunpaid be recognised as a liability. If the amountalreadypaid in respectof currentandpriorperiodsexceedstheamountdueforthoseperiods,theexcessshallberecognisedasanasset.
3.11.2 Deferred tax Deferredtaxisprovidedusingtheliabilitymethodon
temporary differences between tax bases of assetsandliabilitiesandtheircarryingamountsforfinancialreporting purposes at the reporting date. Deferredtax liability is recognised for all taxable temporarydifferences. Deferred tax asset is recognised for alldeductible temporary differences, carry forward ofunusedtaxlossesandunusedtaxcredits.Deferredtaxassetarerecognisedtotheextentthatitisprobablethat taxable profit will be available against whichdeductible temporary differences , carry forwardof unused tax losses andunused tax credits canbeutilised.Thecarryingamountofdeferred taxassetsis reviewed at each reporting date and reduced totheextentthatitisnolongerprobablethatsufficienttaxableprofitwillbeavailabletoallowallorpartofthedeferredtaxassettoberecovered.
Deferred tax assets and liabilities are measured atthe tax rates thatareexpected toapply in theyearwhen the asset is realised or the liability is settledbasedontaxratesandtax lawsthatareenactedorsubstantiallyenactedatthereportingdate.
Deferred tax relating to items recognised outsideprofit or loss is recognised outside profit or loss.Deferredtaxitemsarerecognisedincorrelationtotheunderlyingtransactioneitherinothercomprehensiveincomeordirectlyinequity.
Deferred tax assets and deferred tax liabilities areoffset if a legally enforceable right exists to set offcurrent tax assets against current liabilities anddeferredtaxesrelatetothesametaxableauthority.
3.11.3 Value Added Tax (VAT) Expensesandassetsare recordednetofamountof
VATexceptwhen theVAT incurredon thepurchaseof assets or services is not recoverable from taxauthorities,inwhichcase,thetaxisrecognisedaspartof the expenses items as applicable. All receivablesand payables are stated with the amount of ValueAddedTaxincluded.ThecompanyremitsoutputVAT
NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
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totherevenueauthorityonacashbasis.
3.12 Employee Benefits Employee benefits are all forms of consideration
givenbyanentityinexchangeforservicerenderedbyemployeesorfortheterminationofemployment.
3.12.1 Short term employee benefits Employee benefits other than termination benefits
that are expected to be settled wholly beforetwelve months after the year end of the annualreportingperiodinwhichtheemployeesrendertherelated service. The short term benefits compriseremunerationintheformofsalaries,wages,bonuses,employeeentitlementto leavepayandmedicalaid.When an employeehas rendered service during anaccounting period the entity shall recognize theundiscounted amount of the short term benefitsexpectedtobepaidinexchangeforthatserviceasanexpenseorasaliability(accruedexpense).
3.12.2 Post-employment benefits Employee benefits other than termination benefits
and short term benefits that are payable after thecompletion of service. They comprise retirementbenefits provided through a Defined Benefit Planadministered by the Communication and AlliedIndustriesPensionFund,amulti-employerplan.ThecompanyalsocontributestoNationalSocialSecurityAuthority.Whenanemployeehas rendered serviceduringanaccountingperiodtheentityshallrecognizethe contribution payable to a defined contributionplanasanexpenseorasaliability(accruedexpense).
3.12.3 Termination benefits Employee benefits provided in exchange for the
termination of an employee’s employment as aresult of either an entity’s decision to terminatean employee’s employment before the normalretirementdateoranemployee’sdecisiontoacceptanofferofbenefits inexchange for the terminationof employment. The company recognises a liabilityandexpenseattheearlierofwhentheentitycannolongerwithdrawtheofferofthosebenefitsandwhenthe entity recognises costs for restructuring that iswithin the scope of IAS 37 Provisions, ContingentLiabilities and Contingent Assets and involves thepayment of termination benefits. Terminationbenefitsaremeasuredaccordingtothetermsoftheterminationcontract.
3.13 Fair value measurement The company measures financial instruments such
as available for sale financial assets at fair value ateachbalancesheetdate.Fairvalue isthepricethatwouldbereceivedtosellanassetorpaidtotransfera liability in anorderly transactionbetweenmarketparticipants at measurement date. The fair valuemeasurement isbasedonthepresumptionthatthetransaction to sell the asset or transfer the liabilitytakes place in the principalmarket for the asset orliabilityorintheabsenceofaprincipalmarketinthemostadvantageousmarket for theassetor liability.The principal or most advantageous market mustbe accessible to the company. The fair valueof theassetor liability ismeasuredusing theassumptionsthatmarketparticipantswouldusewhenpricingtheasset or liability assuming that market participantsact in their economic best interest. A fair valuemeasurement of a non-financial asset takes intoaccount a market participant’s ability to generate
economicbenefitsbyusingtheassetinitshighestandbestuseorbysellingittoanothermarketparticipantthatwouldusetheassetinitshighestandbestuse.Thevaluationtechniquesthatareusedarethosethatare appropriate in the circumstances and forwhichsufficient data are available to measure fair valuemaximisingtheuseofrelevantobservableinputsandminimizingtheuseofunobservableinputs.
3.13.1 Fair value hierarchy All assets and liabilities for which fair value is
measured or disclosed in the financial statementsarecategorisedwithinthefairvaluehierarchybasedonthelowestlevelinputthatissignificanttothefairvaluemeasurement.• Level 1 - Quoted (unadjusted) market prices in
activemarketsforidenticalassetsorliabilities• Level2-Valuationtechniquesforwhichthelowest
level input that is significant to the fair valuemeasurementisdirectlyorindirectlyobservable
• Level3-Valuationtechniquesforwhichthelowestlevel input that is significant to the fair valuemeasurementisunobservable
External valuers are engaged for the valuation ofsignificantassetslikeproperty,plantandequipmentand investment property. Selection criteria includesmarket knowledge, reputation, independence andwhetherprofessionalstandardsaremaintained.
3.15 Foreign currency transactions The company’s presentation currency is the United
States Dollar (USD). Foreign currency transactionsare recordedon initial recognition in the functionalcurrencybyapplyingtotheforeigncurrencyamountthe spot exchange rate between the functionalcurrency and the foreign currency at the date ofthe transaction period. At each reporting datemonetaryitemsaretranslatedusingtheclosingrate.Non-monetary items thataremeasured in termsofhistoricalcostinaforeigncurrencyshallbetranslatedusingtheexchangerateatthedateofthetransaction.Non-monetaryitemsmeasuredatfairvalueshallbetranslatedusingtheexchangeratesatthedatewhenthefairvaluewasmeasured.
3.16 Government grants Government grants are assistance by government
in the formof transfersof resources toanentity inreturn for past or future compliance with certainconditions relating to theoperatingactivitiesof theentity. Government grants including non-monetarygrants at fair value shall not be recognised untilthere is reasonable assurance that the entity willcomply with the conditions attaching to them andthegrantswillbereceived.Agovernmentgrantthatbecomesreceivableascompensationforexpensesorlosses already incurredor for thepurposeof givingimmediate financial support with no related costsshall be recognised in profit or loss of the periodin which it becomes receivable. Grants related toincomearepresentedaspartofprofitorloss.GrantsrelatedtoassetsshallbepresentedintheStatementof Financial Position as deferred income or bydeductingthegrantinarrivingatthecarryingamountoftheasset.
NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
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3.17 Current and Non-Current classification The company presents assets and liabilities in the
statementoffinancialpositionusingthecurrentandnon-currentclassification.
Anassetiscurrentwhenitisexpectedtoberealisedor intended to be sold or consumed in the normaloperatingcycleor● heldprimarilyforthepurposeoftrade● expectedtoberealisedwithintwelvemonthsafter
thereportingperiod● cash or cash equivalent unless restricted from
beingexchangedorusedtosettlealiabilityforatleasttwelvemonthsafterthereportingperiod
The company classifies all other assets that do notmeettheabovedefinitionasnon-current.
Aliabilityiscurrentwhen● itisexpectedtobesettledinthenormaloperating
cycle● itisheldprimarilyforthepurposeoftrading● it isduetobesettledwithintwelvemonthsafter
thereportingperiod● there is no unconditional right to defer the
settlement of the liability for at least twelvemonthsafterthereportingperiod
Thecompanyclassifiesallotherliabilitiesthatdonotmeettheabovedefinitionasnon-current.
Deferred tax assets and liabilities are classified asnon-currentassetsandliabilitiesrespectively.
NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
OVERVIEW
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NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
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s. OVERVIEW
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Audited Audited 31 Dec 2017 31 Dec 2016 USD USD
4.2 CAPITAL WORK IN PROGRESS
Openingcarryingamount 14,388,999 - Additions 47,016,666 14,389,000 Reclassificationto -Property,plantandequipment (626,322) - -Intangibleassets (4,571,731) - Closing carrying amount 56,207,612 14,389,000 TelOneiscurrentlycarryingoutmajorcapitalprojectstomodernisethetelecommunicationsnetwork.Theseprojectsare
expectedtobecompletedin2018.IncludedinadditionsarecapitalisedborrowingcostsofUS$615,473relatingtomajorcapitalprojectsthatwereundertakenaspartoftheNBBProject.
4.3 NON CURRENT ASSETS HELD FOR SALE Opening carrying amount - -
ReclassificationfromProperty,PlantandEquipment 280,986 -
Closing carrying amount 280,986 - Itemsofproperty,plantandequipmentwerereclassifiedtonon-currentassetsheld forsale.These itemswerepower
equipmentwhichwasreplacedbynewequipmentthatcamewiththeNationalBroadbandProject.Non-currentassetsheld for salearecarriedat the lowerof their carryingamountsand their fairvalue less costs to sell. There is realisticexpectationthattheywillbedisposedin2018.
5 INVESTMENT PROPERTY Opening carrying amount 1,034,030 1,052,000 Netreplacementvalue 1,176,876 1,176,876 Accumulateddepreciation (142,846) (124,876) Additions 39,832 - Depreciationchargefortheyear (17,970) (17,969) Closing carrying amount 1,055,892 1,034,030 Netreplacementvalue 1,216,708 1,176,876 Accumulateddepreciation (160,816) (142,846) Theinvestmentpropertyportfoliohascommercialproperty(MemorialBuilding)leasedtothirdpartiesandcommercial
land.Leaseshavevariedrunningperiodsandallrenewalsarenegotiatedwiththelessee.Contingentrentalsarechargeableforallthetenantsequivalenttothemonthlyrentalcharge.Owneroccupancyislessthan20%ofthetotalleasableareaforallthebuildingsclassifiedasinvestmentproperty.
ThefairvalueofMemorialBuildingwasdeterminedtobeUSD1,899,649asat31December2017
Included in the statement of profit or loss and other comprehensive income is the following rental income and expenses: Rentalincome 1,125,365 1,111,960 Operatingexpensesthatgeneratedrentalincome (647,719) (532,228) Net rental income 477,647 579,732
Future rental income Upto1year 1,125,365 1,111,960 Over1year;lessthan5years 4,501,462 4,447,839 Over5years 5,626,827 5,559,799
Total expected receipts 11,253,654 11,119,599
NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
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NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
Audited Audited 31 Dec 2017 31 Dec 2016 USD USD
6 INTANGIBLE ASSETS
Openingcarryingamount 20,628,327 23,557,460 Grosscarryingamount 27,707,918 28,002,221 Accumulatedamortisation (7,079,591) (4,444,761) Additions 7,055,100 32,553 Reclassification 4,519,554 (326,857) Amortisationfortheyear (4,458,214) (2,634,830) Closing carrying amount 27,744,768 20,628,327
Intangibleassetsincludethebelowlistedassets: IndefeasiblerightofuseinWestIndianOceanCableCompany(WIOCC) 15,292,337 16,123,940 Networksupportsystems 4,168,633 - Businesssupportsystems 7,632,135 4,185,809 Othersystems 651,663 318,578
27,744,768 20,628,327
7 AVAILABLE FOR SALE INVESTMENTS Openingbalance 1,048,835 795,697 Additions - 54,615 Remeasurementgain 309,381 198,523 Closing carrying amount 1,358,216 1,048,835
FinancialinstrumentsincludecompanyshareinvestmentsinZimbabweStockExchange(ZSE)listedcompaniesandsharesintheWestIndianOceanCableCompany(WIOCC).InvestmentsinZSElistedcompaniesaremeasuredatfairmarketvaluesdeterminedasat31December2017.
8 INVENTORIES Manufacturing 569,092 588,460 Telecomms 6,434,761 5,923,422 Transport 598,677 377,308 General 1,626,076 1,541,607 9,228,606 8,430,797
Inventoriescarryingvaluesdonotexceedtheirrecoverableamounts.
9 TRADE AND OTHER RECEIVABLES Tradereceivables 235,930,186 206,076,737 Allowanceforcreditlosses (87,004,690) (66,669,335) Net trade receivables 148,925,496 139,407,402 Otherreceivables 1,708,859 608,311 CentreforLearningreceivables 1,868,430 858,994 Realestatereceivables 1,527,868 1,446,293 IDBZreceivables 2,216,738 2,216,738 StanbicEscrow 1,000,000 1,000,000 ChinaEximEscrow 4,341,790 - 161,589,181 145,537,738
IncludedinreceivablesarefundsintheIDBZBankAccount,StanbicEscrowAccountandTheDebtServiceReserveFund.Thesefundsnolongerrepresentcashandcashequivalentsastheycannotbeeasilyaccessed.
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Audited Audited 31 Dec 2017 31 Dec 2016 USD USD
10 CASH AND CASH EQUIVALENTS Bankandcashbalances 8,275,684 2,239,974 Shorttermmoneymarketinvestments 1,072,712 1,345,787 9,348,396 3,585,761
11 SHARE CAPITAL Authorisedsharecapital
32000ordinarysharesof$0.001each 32 32
Issuedandfullypaidsharecapital 32000ordinarysharesof$0.001each 32 32
TheissuedsharesareheldbynomineesonbehalfoftheGovernmentofZimbabwe.
12. FOREIGN LOANS
NAME OF LOAN PROJECT FINANCEDINTEREST RATE % CURRENCY
REDEMPTION COMMENCEMENT
DATE
FINAL REDEMPTION
DATE31 Dec 2017
USD31 Dec 2016
USD
AFRICANDEVELOPMENTBANK(ADB11) 2TELECOMMUNICATIONS11
7.45% USD 1999 2014 89,967,141 78,427,441
BANQUENATIONALEDEPARIS(BNP) WIRELESSLOCALSYSTEM 7.68% EURO 1997 2005 35,289,083 27,882,577
EKSPORTFINANS EXTENSIONOFMUTARE 8.30% NOK 1993 2003 12,618,031 10,690,270
KREDITANSTALTFURWIEDERAUFBAU(KFW)1PORTION1
HARAREUNIT5EXCHANGE
0.75% EURO 1993 2033 7,696,826 6,799,026
KREDITANSTALTFURWIEDERAUFBAU(KFW)11PORTION1
HARAREWESTERNSATELITEEXCHANGE
2.00% EURO 1994 2014 12,595,908 11,237,132
KREDITANSTALTFURWIEDERAUFBAU(KFW)111
TELEPRINTERSSOUTHERTONEXCHANGE
4.50% EURO 1995 2012 10,916,633 9,930,826
KREDITANSTALTFURWIEDERAUFBAU(KFW)VPORTION1
RURALTELECOM 0.75% EURO 2003 2032 10,796,605 9,543,475
PORTION11 MATEBELELAND 2.00% EURO 2003 2022 8,195,493 7,215,750
OVERSEASECONOMICCO-OPERATIONFUND(OECF)III
MATEBELELANDDIGITALISATION
3.00% YEN 2003 2023 146,556,116 145,227,456
OVERSEASECONOMICCO-OPERATIONFUND(OECF)IV
DIGITALTRANSSYSTEMS 2.60% YEN 2005 2025 4,056,808 3,899,440
OVERSEASECONOMICCO-OPERATIONFUND(OECF)V
MASH&MANICALANDDIGITALISATION
2.30% YEN 2006 2026 24,664,901 24,064,821
EXIMBANKOFJAPAN(SUMITOMO11) 2NDMAZOEEARTHSTATION
6.00% YEN 1995 2004 9,247,243 8,803,882
TCF(INGBANK1&3) MUTAREEXTERNALPLANT&EXPANSIONOFCHIKANGAWORKS
4.000% USD 1997&2000 2019 4,026,142 7,265,485
Sub total: Legacy loans 376,626,930 350,987,582
EXPORT-IMPORT(CHINAEXIMBANK) NBBprojectloandrawdowns
2.000% USD 2022 2037 79,206,315 -
TOTAL FOREIGN LOANS 455,833,245 350,987,582
Statement of financial position classification Currentliabilities-Foreignloans:duewithinoneyear 148,517,960 133,332,007Currentliabilities-Loaninterestpayable(Note15.3) 194,936,204 177,304,128Noncurrentliabilities-Foreignloans:dueafteroneyear 112,379,081 40,351,447 455,833,245 350,987,582
AllforeignloansareguranteedbytheGovernmentofZimbabwe.LoansclassifiedaslegacyloanswereincurredduringthePostalandTelecommunicationsCorporation(PTC)erapriortoitsunbundling.
NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
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Audited Audited 31 Dec 2017 31 Dec 2016
13 LOCAL LOANS USD USD FBC BANK IDBZ TOTAL TOTAL
Openingbalance 1,615,385 23,613,332 25,228,717 27,975,828 Repayments (1,615,385) - (1,615,385) (4,137,879) Chargescapitalised - 1,479,696 1,479,696 1,390,768 Closing balance - 25,093,028 25,093,028 25,228,717 13.1 Short-term portion of local loans - 25,093,028 25,093,028 25,228,717 - 25,093,028 25,093,028 25,228,717 13.2 Infrastructure Development Bank (IDBZ) loan The IDBZ local loan is in respect of loan funds that were received from the Government of Zimbabwe through the
InfrastructuralDevelopmentBankfortheMutare-HarareandHarare-BulawayoOpticfibreprojects.Thetermsoftheloanareasfollows: Interestrate 5%p.a
Repaymentperiod 8months Interestcalculationperiod Monthly Penaltyrate 1%p.a Effectivepenaltyrate 6%p.a
13.3 FBC Bank loan TheFBCBankloanwasgrantedbyFBCBankfortheFTTHProject.Thetermsoftheloanareasfollows: NominalInterestrate 12%p.a EffectiveInterestrate 12.68250%p.a Repaymentperiod 26months Interestcalculationperiod Monthly TheloanwassecuredbyMemorialBuildingandCentreforLearningproperties.
Au Audited Audited 31 Dec 2017 31 Dec 2016 USD USD
14 TAXATION 14.1 Income tax expense Tax expense (9,583,946) (7,784,027) Currenttax 692,208 (1,444,321) Deferredtax (10,276,154) (6,339,706) 14.2 Tax rate reconciliation
Lossbeforetax (39,456,452) (32,708,908) Notionaltaxchargebasedonprofitfortheyearat25.75% (10,160,036) (8,422,544) Neteffectoftemporary/permanentdifferences 576,090 638,517 (9,583,946) (7,784,027)
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Audited Audited 31 Dec 2017 31 Dec 2016 USD USD14.3 Deferred tax liability Analysisoftemporarydifferences Property,plantandequipmentaccelerated 77,882,930 85,933,074 Accruals (7,900) (66,263) Fairvalueremeasurementgain 3,094 3,425 DeferredIncome (106,210) - Leavepayprovision (806,663) (612,096) Unrealisedexchangelosses (2,892,924) (4,950,603) Allowanceforcreditlosses (22,403,708) (17,167,354) Othergains 38,849 - Net deferred tax liability 51,707,467 63,140,184
14.4 Tax receivable Openingbalance (2,694,089) (448,594) Chargefortheyear 692,208 (1,444,321) Chargefortheyear-othercomprehensiveincome 3,094 1,985 Taxpaid (530,604) (803,160) Closing balance (2,529,392) (2,694,089)
15 TRADE AND OTHER PAYABLES 15.1 Trade payables Local 50,904,752 37,448,950 Foreign 26,303,761 42,563,339 77,208,513 80,012,289
15.2 Statutory payables 74,676,803 61,100,570 PostalandTelecommunicationsRegulatoryAuthorityofZimbabwe 36,344,850 32,790,371 ZimbabweRevenueAuthority(ZIMRA) 2,918,562 5,535,598 CommunicationandAlliedIndustriesPensionFund 35,413,391 22,774,601 151,885,315 141,112,860 15.3 Loan interest payable 194,936,204 177,304,128 Loaninterestpayablerelatestoaccumulatedinterestonlegacyloansdisclosedinnote12
15.4 Long-term payable 4,517,258 17,365,361
ThecompanyiscurrentlycarryingouttheNationalBroadbandProject(NBB)andHuaweiisthesupplieroftheequipmentfortheproject.TheNBBisbeingfundedbyaloanfromtheChinaEximBank.Theloanwassecuredthroughanon-lendingfacilitywiththeGovernmentofZimbabwe.TheguarantoroftheloanisNetOne(Private)Limited.Thelongtermpayablerepresentsservicesrenderedforwhichdrawdownispending.
16 PROVISIONS Leavepay 2,979,782 2,210,166 Bonus 152,891 153,358 3,132,673 2,363,524
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Audited Audited 31 Dec 2017 31 Dec 2016 USD USD16.1 Leave pay provision Openingbalance 2,210,166 1,646,630 Additions 1,111,439 1,604,417 Payments (341,823) (1,040,880) Closing balance 2,979,782 2,210,166
16.2 Bonus provision Openingbalance 153,358 152,960 Additions 1,819,729 1,700,849 Payments (1,820,196) (929,287) Unusedamountsreversed - (771,163) Closing balance 152,891 153,358
17 REVENUE Revenuecomprises: Voicerevenue 67,965,008 73,139,165 Datarevenue 11,655,446 5,401,513 Internetrevenue 31,743,094 27,914,653 V-Satrevenue 1,284,194 1,460,773 Interconnectionrevenue 3,847,985 5,899,711 Telephonehandsets 205,761 227,120 116,701,488 114,042,935
18 PAYMENTS TO OTHER OPERATORS VSAThandlingcosts 2,029,872 2,073,175 Telephoneforeignhandlingcosts 753,072 994,875 Datahandlingcosts 382,608 382,608 Internethandlingcosts 5,282,860 5,944,365 Localinterconnectioncosts 11,856,441 11,574,377 20,304,854 20,969,400
19 OTHER INCOME Insurancerecoveries 1,864 398 Deferredincome 328,700 317,423 Rentalincome 1,125,365 1,004,818 Dividendsreceived 806,298 320,999 Netincomefromsaleofprocessedcoppercables 247,923 355,746 Centreforlearning 2,451,083 1,545,215 Sundryincome 1,494,274 1,880,599 6,455,507 5,425,198
20 OPERATING EXPENSES 20.1 Staff costs 43,946,686 41,828,777
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Audited Audited 31 Dec 2017 31 Dec 2016 USD USD20.2 Other operating expenses Storeshandlingcosts 3,371,572 3,265,700 Electricity,rentandrates 7,405,537 6,824,502 Transportcosts 2,997,645 2,947,658 Inventoryadjustments 85,326 465,931 Writeoffexpenses - 213,832 Officeandadminexpenses 5,582,939 6,627,026 Softwarelicences 1,891,361 2,088,196 Marketingexpenses 2,580,719 2,191,535 Provisionforbaddebts 12,300,955 11,653,914 Otheroperatingexpenses 4,087,599 11,196,434 40,303,653 43,091,658 20.3 Special excise duty on airtime Specialexcisedutyonairtime 1,270,826 -
21 NET FINANCE INCOME 21.1 Finance Income Interestincome 1,797,760 319,901 InSeptember2017,adecisionwasmadetochargeinterestonoutstandingdebtors'balancesfordefaultingclients.Interest
at 3%was levied effective 30November 2017, the expectation being to encourage clients to settle their outstandingbalancesandpaytheirservicebillsontime.
21.2 Finance Costs (17,171,147) (19,646,315) Interestexpenseoncurrentloans (2,043,928) (1,807,460) Interestexpenseonlegacyloans (15,127,219) (17,838,856)
22 FOREIGN EXCHANGE LOSSES (14,097,649) (1,435,228) Exchangelossonforeignlegacyloans (11,793,517) (1,026,985) Exchangelossonforeignpayables (2,304,133) (408,242)
23 EMPLOYEE BENEFITS 23.1 Pension Fund TheCompanymakescontributionsforalleligibleemployeestoamultiemployerdefinedbenefitplanadministeredby
theCommunicationsandAllied IndustriesPension Fund (CAIPF). The fund is run collectively for the formerPosts andTelecommunicationsCorporations(PTC)companies.
31 Dec 2017 31 Dec 2016 Empoyee benefits USD USD Shorttermbenefits 43,899,325 37,062,218 Postemploymentbenefits 4,572,732 4,681,075 Otherlongtermbenefits 456,513 463,510 48,928,569 42,206,803 ThePensionFundisadefinedbenefitplanadministeredbytheCommunicationandAlliedIndustryPensionFund[CAIPF].It
isbeingaccountedforasifitwereadefinedcontributionplanbecausesufficientinformationisnotavailabletousedefinedbenefitaccountinginlinewiththerequirementsofIAS19asitisnotpossibleforthepensionfundtoallocatetheplanassetstoeachcontributingcompanyseparately.
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Theexpensefortheyearended31December2017amountedtoUS$4,572,732(2016US$4,681,075).Liabilityasat31December2017US$27,962,591(2016US$22,774,601).Thecontributionshavebeendiscountedusingadiscountrateof7%perannum.
Therulesofthefundrequireemployeestocontributeatarateof7.5%ofpensionablesalariestowardsretirementbenefits
whilsttheemployeralsocontributes22.5%contributionstowardsretirementbenefits. TherulesoftheCAIPFrequireanactuarialvaluationtobeperformedatleasteverythreeyearsbutthecurrentpracticeofCAIPFistoperformannualvaluations.
ThepensionfundrecordedadeficitofUS$97.3millionasat31December2016. 23.2 National Social Security Authority Scheme This is a defined contribution scheme promulgated under the National Social Security Act of 1989. The Company’s
obligationsundertheschemearelimitedtospecificcontributionsaslegislatedfromtimetotime.ThecontributionsfortheyearendedDecember31,2017amountedtoUS$518,104(2016:US$531,584)
24 RELATED PARTY TRANSACTIONS 31 Dec 2017 31 Dec 2016 USD USD24.1 Transactions CommunicationsandAlliedIndustriesPensionFund Pensionfundcontributions 4,572,732 4,681,075 Loanrepayment - 1,368,649 4,572,732 6,049,724
NetOne(Pvt)Ltd-leaseofmicrowavesites,Cellphonecharges, leasedcircuitsandinterconnectincome 7,159,244 8,123,803 Zimpost-rentalofpropertyandpostageanduseoftelecomproducts 2,704,094 2,161,926 9,863,338 10,285,729
24.2 Amounts owing from related parties (debtors) Governmentdepartmentsandministries 55,602,185 48,253,292 NetOne(Pvt)Ltd 7,675,391 10,316,385
Zimpost(Pvt)Ltd 624,497 415,784 Otherstateownedentities 23,984,538 25,465,972 87,886,611 84,451,433 24.3 Amounts owing to related parties (creditors) Zimpost(Pvt)Ltd 427,994 512,321 NetOne(Pvt)Ltd 605,913 241,852 CommunicationandAlliedIndustriesPensionFund 27,962,591 22,774,601 28,996,498 23,528,774
24.4 Compensation to the Board of Directors and Key Management personnel TheremunerationofDirectorsandmembersofKeyManagementduringtheyearwasasfollows:
Board of Directors Non executive directors' fees 39,299 72,675
Members of key management Shorttermemployeebenefits 743,006 871,815 Postemploymentbenefits 40,820 78,353 Total emoluments 823,125 1,022,842
Compensationtokeymanagementisinrespectoffivemembersofseniormanagement.Compensationtokeymanagementis determinedby theBoardofDirectorswith reference to individual performance, companyperformanceandmarkettrends.
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25 FINANCIAL RISK MANAGEMENT25.1 Exposure to credit risk
Thecarryingamountoffinancialassetsrepresentsthemaximumcreditexposure. Themaximumexposuretocreditriskatthereportingdatewas:
31 Dec 2017 31 Dec 2016
USD USD Tradereceivables 235,930,186 206,076,737 Otherreceivables 1,708,859 2,913,598 Availableforsaleinvestment 1,358,216 1,048,835 Cashandcashequivalents 9,348,396 3,585,761 248,345,657 213,624,930
Exposuretocreditriskwasincreasedbythepooreconomicperformance,however,adequateprovisionwasmadeagainsttradereceivablesconsidereddoubtful.TheCompany’sexposuretocreditriskongovernmentdebtorsisreducedbythefactthatGovernmentTreasuryhaspromisedtopayallgovernmentoutstandingamounts.
Impairment losses Theageingoftradereceivablesatthereportingdatewasasfollows:
Gross Impairment 31 Dec 2017 31 Dec 2016 USD USD USD USD Notpastdue 7,797,963 - 7,797,963 7,615,294 Pastdue0-30days 8,147,457 - 8,147,457 7,587,201 Pastdue31-120days 15,143,855 - 15,143,855 13,261,652 Morethan120days 204,840,911 (87,004,690) 117,836,221 110,943,255 235,930,186 (87,004,690) 148,925,496 139,407,402 Theallowanceaccountinrespectoftradereceivablesrecordsimpairmentlossesuptothepointthecompanyissatisified
thatnorecoveryoftheamountowingispossible.Atthatpoint,theamountisconsideredirrecoverableandwrittenoffagainstthefinancialassetdirectly.
25.2 Liquidity risk Thefollowingarecontractualmaturitiesoffinancial liabilities, includingestimatedinterestpaymentsandexcludingthe
impactofnettingagreements: 31 Dec 2017 Carrying Contractual 12 Months Amount cash flows 0-12 Months or more USD USD USD USD Non-derivative financial liabilities Tradepayables 77,208,513 77,208,513 77,208,513 - Otherpayables 74,676,803 74,676,803 74,676,803 - Loans 260,897,041 260,897,041 148,517,960 112,379,081 412,782,356 412,782,356 300,403,275 112,379,081 31 Dec 2016 Carrying Contractual 12 Months Amount cash flows 0-12 Months or more USD USD USD USD Non-derivative financial liabilities Tradepayables 57,569,586 57,569,586 57,569,586 - Otherpayables 70,355,183 70,355,183 70,355,183 - Loans 173,683,454 173,683,454 133,332,007 40,351,447 301,608,223 301,608,223 261,256,776 40,351,447
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The above non derivative financial liabilities are all classified as financial liabilities measured at amortised cost. TheCompanyhadnoderivativefinancialliabilitiesasat31December2017.
25.3 Currency risk Exposure to foreign currency risk
Thecompany’sexposuretoforeigncurrencyriskisattributabletotheEuro(EURO),JapaneseYen(YEN),andNorwegianKroner(NOK)denominatedmonetaryassetsandliabilities.Theexposurewasasfollowsat31December2017,basedonnotionalamounts:
Receivables Payables Net exposure 2017 EURO - 22,248,512 22,248,512 YEN - 103,030,275 103,030,275 NOK - 1,757,330 1,757,330
2016 EURO - 28,929,474 28,929,474 YEN - 96,860,491 96,860,491 NOK - 1,616,242 1,616,242 Thefollowingsignificantexchangeratesappliedduringtheyear:
31 Dec 2017 31 Dec 2016 EURO 0.83 1.08 YEN 112.69 119.87 NOK 8.21 8.92
NOTES TO THE FINANCIAL STATEMENTSfortheyearended31December2017(continued)
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25.4 Currency risk Sensitivity analysis
A10%fluctuationoftheUnitedStatesdollaragainsttheEuro,JapaneseYenandNorwegianKronerwouldhaveincreased/decreasedequityandprofitorlossbytheamountsreflectedbelow.Thisanalysisisbasedonforeigncurrencyexchangeratevariancesthatthecompanyconsideredtobereasonablypossibleattheendofthereportingperiod.Theanalysisassumesallvariablesremainthesame.
Equity Profit or loss Effect USD USD 31-Dec-16 EURO 10%appreciation (2,990,946) (2,990,946) 10%depreciation 2,990,946 2,990,946
YEN 10%appreciation (9,380,083) (9,380,083) 10%depreciation 9,380,083 9,380,083
NOK 10%appreciation (159,579) (159,579) 10%depreciation 159,579 159,579
31-Dec-17 EURO
10%appreciation (2,224,851) (2,224,851) 10%depreciation 2,224,851 2,224,851 YEN 10%appreciation (10,303,027) (10,303,027) 10%depreciation 10,303,027 10,303,027
NOK 10%appreciation (175,733) (175,733) 10%depreciation 175,733 175,733
25.5 Interest rate risk 31 Dec 2017 31 Dec 2016
USD USD Asat31December2017,theinterestrateprofileofthecompany' interestbearing-financialinstrumentswas:
Fixedraterisk Financialassets 1,072,712 1,345,787
Financialliabilities 260,897,041 173,683,454 261,969,752 175,029,240 25.6 Treasury and financial risk management
Themainrisksarisingfromthecompany’sfinancialinstrumentsaremarketrisk(whichincludescurrencyriskandinterestraterisk),creditriskandliquidityrisk.Thecompanydoesnotusederivativefinancialinstrumentsforspeculativepurposes.TheBoardofDirectorshastheoverallresponsibilityfortheestablishmentandoversightofthecompany’sriskmanagementframework.Thecompany’s riskmanagementpoliciesarereviewedbymanagementonaregularbasis foradequacy inbeingabletomanageanychangesinrisksarisingfromchangesintheoperatingenvironment.
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26 GOING CONCERN Loan repayments
Thecompanydefaultedininterestandprincipalrepaymentsonforeignloans.Outstandingloansaredetailedinnotes12and13.
Net Liability Position 31 Dec 2017 31 Dec 2016 USD USD
Totalassets 548,374,422 489,744,186 Totalliabilities (692,581,455) (600,939,047) Net liability position (144,207,033) (111,194,861) Thoughthecompanyhasanetliabilitypositionandhasnotbeenabletohonouritslegacyloanobligations,itispursuinga
businesstransformationstrategywhichissettoturnaroundthecompany.Projectsthatarecurrentlybeingimplementedinvolvemodernisationof thenetworkwith theaimof improving revenueandmanaging costs. The companyhas alsosoughtadebtwarehousingarrangementamountingto$360million.AlthoughtheloansarestillonTelOne'sstatementoffinancialposition,thegovernmentisawareofitsobligationsintermsoftheguaranteesrendered.ThecompanyalsohassignificantassetsofstrategicimportancetotheGovernmentofZimbabwe.Furthermore,thedirectorsarenotawareofanyothermaterialuncertaintiesthatmaycastsignificantdoubtuponthecompany'sabilitytocontinueasagoingconcern.Accordingly,thefinancialstatementshavebeenpreparedonagoingconcernbasis.
ThecompanyhasalsoembarkedontheNBBProjectwhichhasbeenaccordedthenationalprojectstatus.Theprojectwilltotallyrevampthenetworktherebyimprovingservicedelivery. Implementationoftheprojectwillbringaboutpositivecashflowswhichwilllimprovethenetliabilityposition.
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ANNEXURES
General Corporate Information
Head OfficeRunhareHouse107KwameNkrumahAvenueHarareTelephone:+263-24-2798111Website:www.telone.co.zw
AuditorsTheAuditorGeneral5thFloor,BurroughsHouse48GeorgeSilundikaAvenueHarareTelephone:+263-24-2793611/4Website:www.auditorgeneral.gov.zw
Main BankersStanbicBankStanbicCentre59SamoraMachelAvenueHarareTelephone:+263479920051Website:www.stanbicbank.co.zw
FBCBankFBCCentre45NelsonMandelaAvenueHarareTelephone:+263-24-2700312Website:www.fbc.co.zw
Legal AdvisorsDube,Manikai&Hwacha6thFloor,GoldbridgeEastgateComplexSamNujomaStreet/RobertMugabeRoadHarareTelephone:+2634-24-2250909-11Website:www.dmh.co.zw
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Glossary of Terms
The following abbreviations are used through-out the report, they have been explained below for ease ofreference.
ADSL AsymmetricDigitalSubscriberLine
ARPL AverageRevenuePerLine
ARPU AverageRevenuePerUser
ASTT AverageServiceTurnaroundTime
BoP BeginningOpeningBalance
CAPEX CapitalExpenditure
CDMA CodeDivisionMulti-Access
CPE CustomerPremiseEquipment
CRM CustomerRelationshipManagement
EBIT EarningsBeforeInterestandTax
EBITDA EarningsBeforeInterest,Tax,DepreciationandAmortisation
EBIT EarningsBeforeTax
FMC FixedMobileConvergence
FMCG FastMoneyConsumerGoods
GIS GeographicalInformationSystem
GISP GovernmentInternetServiceProvider
GoZ GovernmentofZimbabwe
GRI GlobalReportingInitiative
GSM GlobalSystemforMobile
HSPA HighSpeedPacketAccess
ICT InformationCommunicationTechnology
IP InternetProtocol
IMS IP-MultimediaSubsystem
KPI KeyPerformanceIndicators
KRA KeyResultArea
LTE LongTermEvolution
MVNO MobileVirtualNetworkOperator
MPLS MultiprotocolLabelSwitching
MSAN Multi-ServiceAccessNode
NOC NetworkOperationsCenter
OPEX OperatingExpenditure
OPGW OpticalGroundWire
PABX PrivateAutomatedBranchExchange
RBM ResultBasedManagement
RFP RequestForProposal
ROI ReturnOnInvestment
SME SmalltoMediumEnterprise
SOHO SmallOfficeHomeOffice
SPB StateProcurementBoard
T&S TravelandSubsistence
OVERVIEW
GOVERNANCE
SUSTAINABILITY
FINANCIALPERFORMANCE
ANNEXURES
ANNEXURES (continued)
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ANNEXURES (continued)
Glossary of Terms (continued)USF UniversalServiceFund
VAS ValuedAddedServices
VAT ValueAddedTax
VOBB VoiceOverBroadband
VoIP VoiceOverInternetProtocol
VPN VirtualPrivateNetwork
VSAT VerySmallApertureTerminal
Wi-Fi WirelessFidelity
WiMAX WorldwideInteroperabilityforMicrowaveAccess
WIOCC WestIndianOceanCableCompany
ZIMCODE NationalCodeonCorporateGovernance(Zimbabwe)
ZIMASSET ZimbabweAgendaforSustainableSocialEconomicTransformation
OUT WITH THE OLD NUMBERS. IN WITH THE NEW. To access all the services available with TelOne’s converged network, your landline number has been modified to start with a prefix. The last digits of your current number remain the same. Area Codes have also been changed as indicated below:
CITY/TOWN CURRENT AREA CODE
NEW AREA CODE
PREFIXING NUMBER
NEW NUMBER EXAMPLE
Harare 04 024 2 (024) 2xxxx (Existing Number) Ruwa 0273 213 (024) 213xxxx (Existing Number) Norton 062 212 (024) 212xxxx (Existing Number) Arcturus 0274 214 (024) 214xxxx (Existing Number) Beatrice 065 212 (024) 212xxxx (Existing Number) Birchenough Bridge 0248 027 203 (027) 203xxxx (Existing Number) Checheche 0317 2317 (027) 2317xxxx (Existing Number) Chimanimani 026 205 (027) 205xxxx (Existing Number) Chipangayi 024 2046 (027) 2046xxxx (Existing Number) Chipinge 0227 2042 (027) 2043xxxx (Existing Number) Mutare 020 020 21 (020) 21xxxx (Existing Number) Penhalonga 020 24 (020) 24xxxx (Existing Number) Odzi 0204 200 (020) 200xxxx (Existing Number) Hauna 0228 026 209 (026) 209xxxx (Existing Number) Juliasdale 029 208 (026) 208xxxx (Existing Number) Nyanga 0329 2098 (026) 2098xxxx (Existing Number) Murambinda 021 025 206 (025) 206xxxx (Existing Number) Nyazura 02583 2055 (025) 2055xxxx (Existing Number) Headlands 02582 206 (025) 206xxxx (Existing Number) Rusape 0225 205 (025) 205xxxx (Existing Number) Bindura 0271 066 210 (066) 2106xxxx (Existing Number) Centenary 057 210 (066) 210xxxx (Existing Number) Concession 0375 219 (066) 219xxxx (Existing Number) Glendale 0376 218 (066) 218xxxx (Existing Number) Mazowe 0275 219 (066) 219xxxx (Existing Number) Christon Bank - 219 (066) 219xxxx (Existing Number) Mount Darwin 0276 212 (066) 212xxxx (Existing Number) Mvurwi 0277 216 (066) 216xxxx (Existing Number) Guruve 058 217 (066) 217xxxx (Existing Number) Shamva 0371 2137 (066) 2137xxxx (Existing Number) Darwendale 069 067 2192 (067) 2192xxxx (Existing Number) Raffingora 0667 2198 (067) 2198xxxx (Existing Number) Mutorashanga 0668 2196 (067) 2196xxxx (Existing Number) Trelawney 0698 2136 (067) 2136xxxx (Existing Number) Chinhoyi 067 21 (067) 21xxxx (Existing Number) Murombedzi 0675 215 (067) 215xxxx (Existing Number) Mhangura 060 214 (067) 214xxxx (Existing Number) Banket 066 214 (067) 214xxxx (Existing Number) Kariba 0261 061 214 (061) 214xxxx (Existing Number) Karoi 0264 214 (061) 214xxxx (Existing Number) Makuti 063 2141 (061) 2141xxxx (Existing Number) Chirundu 0637 2140 (061) 2140xxxx (Existing Number) Kadoma 068 068 21 (068) 21xxxx (Existing Number) Chegutu 053 215 (068) 215xxxx (Existing Number) Chakari 0688 2189 (068) 2189xxxx (Existing Number) Sanyati 0687 216 (068) 216xxxx (Existing Number) Selous 0628 21 (068) 21xxxx (Existing Number)
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NOTES
Runhare House, 107 Kwame Nkrumah AvenueHarare: (04) 783 565/6, Bulawayo: (09) 717 760 or 886 688Gweru: (054) 221 794 or 230 617, Mutare: (020) 63395 or 67666Masvingo: (039) 263 284 or 263 384Call Centre: (04) 700 950WhatsApp: 0718 700 950