Chipo Mtasa steps down as CEO of parastatal telecommunications company, Telone, at the end of the year after serving her full 2 terms stretching between 2013 and 2022. Her legacy will be mixed depending on the variables being assessed. However, as a CEO, the primary measure of success is whether one achieved incremental value for shareholders over their tenure and this is best reflected in profitability and its sustainability. On this front, it is very clear that Chipo Mtasa a girl child champion and inspiration many women aspiring for c-suite corporate careers, failed dismally. To paint the picture more bluntly, Chipo Mtasa will leave Telone in the exact manner she left listed tourism group RTG, which is in losses and unsustainable debt position. It is important to however highlight that in the instance of Telone, the debts and loss positions were inherited while in the case of RTG, she oversaw the deterioration of both profitability and balance sheet positions.
The article looks at Mtasa’s legacy and reviews her term as CEO of Telone. Typically, it is much easier to heap praises at the end of anyone’s tenure but critical introspective and proactive lenses are needed if local institutions are to become more competitive and profitable in the future both public and private. By evaluating performances of key individuals, institutions and boards are able to critically recalibrate their processes from recruitment, contract extension, performance-based bonuses and more crucially adjust the strategic thrust of their businesses which may include changing management personeel timeously to save shareholder value.
Chipo Mtasa’s career at Telone began in 2013 following a very bad spell at RTG where she was CEO for 8 years and its finance director before that. At the time Chipo left RTG the company was undercapitalised and carrying huge debt which weighed on its ability to compete during dollarisation. Still on the high-level analysis, between the 2 companies she presided over, Chipo managed to at least achieve operational profitability, which in both cases was growing year on year in the 2 years leading to her exit. This evaluation brings out a key point to note in the assessment, which is that Chipo was not wired to be a transformational leader, but a continuity leader. Given a stable business, Mtasa could thrive on sustaining a trajectory to some point, but not to change it. A business with a good operational performance but adverse overall profitability requires robust cost management and debt restructuring coupled with a quicker growth in the topline. Mtasa’s record showed only limited capability to drive the topline but not to manage costs and balance sheet.
Within a year of Mtasa’s departure at RTG, the new CEO managed to convince the board and the subsequent top shareholder to recapitalise and restructure the punitive short-term debt. A rights issue was undertaken together with a loan restructuring which saw an injection of US$10 million by the top shareholder. This is the kind of transformational leadership that is required as part of efforts to reconfigure a business. Its however also give and take exercise, where you convince the board that you will sacrifice so much, creating goodwill and in return they should also give so much. As part of his restructuring plan, the RTG CEO who replaced Mtasa committed to massive cost cuts which saw a total of US$2 million being saved in expenses alone in 2013, a 10% drop from prior year, thus driving operational efficiency and overall profitability. In total, RTG saved US3.8 million in 2013 which included US$1.8 million interest savings from balance sheet restructuring.
The restructuring of RTG, just like many other local companies which had diversified into the region during hyperinflation, had begun by the time Mtasa left RTG. To her credit she oversaw the disposal of some non-performing assets including a hotel in Zambia. The level and kind of restructuring pursued under her tenure was too general and less effective in repositioning a bleeding business, which is the same thing that played out at Telone. Just a fortnight ago Chapek was relieved from his role as CEO of Disney, just only 2 years into his appointment and was replaced by his predecessor Bob Iger. Part of the reasons why he was sacked was that he mishandled his restructuring campaign and a tanking in Disney performance, although the company remained profitable. The fluidity of decision making at strategic level and the swift implementation is a stark contrast to rigid and bureaucratic and inefficient system of local entities particularly those in the public sector. Part of the reasons why CEOs like Mtasa got away with poor performance records is because of the quality of shareholders. For RTG, the majority shareholder soon emerged to be NSSA, the social security authority. The authority, by its very positioning, is deep pocketed, yet prone to abuse by gullible political leaders who leverage on its proximity. As a consequence, the quality of board members largely handpicked by government and subsequently responsible for appointing directors at investee companies, will themselves be incompetent for the task. This results in poor board appointment and oversight in investee companies and if prolonged the depth of crisis deepens. In the past, NSSA would appoint its own directors to sit on some boards for investee companies, raking thousands in Director fees without any notable contributions to the investee companies and the citizenry, which is the ultimate shareholder.
The challenges of board incompetencies are even higher at parastatals where appointments are much more likely to be influenced by politics than real business. It is therefore predictable that Chipo’s tenure was going to be much easier from a perspective of oversight and demand for results. Government’s entire parastatals catalogue has only a single profit maker and it is not Telone. If the board of Telone at the respective time of Mtasa’s appointment was as competent there was no way she would have gotten the job in the first place. The qualities that Telone was looking for given its challenges and future goals required a leader who succeeded where Mtasa failed at RTG. The very challenges Mtasa created at RTG and failed to turnaround, were the ones that they tasked her to tackle at Telone. In retrospect, this was insane, but expected in a country where standards in business are very low.
Over her tenure at Telone, Mtasa presided over legacy debts inherited from PTC, which by the time she left were sitting at US$419 million. These legacy loans attracted huge interests and in 2021 alone ZWL10 billion was paid for in interest costs. Against this background the company’s equity position continued to dissipate given perennial losses in constant income. Was this in Mtasa’s control, a question maybe posed. Legacy debts or own debt, a CEO signs up for management of the entire company and not parts of it.
On signing up for the Telone job, Mtasa knew what was at stake or perhaps there was no objective to turnaround the company in the first place and maybe the focus was on tendering the fragile entity until some miracle happens along the way. The company has been in technical insolvency and therefore incapable of contracting new debt. Given the high demand for capex in telecoms, competing has been more difficult. The game at hand, in the now predominant broadband space, requires massive investment and Telone is inhibited due to funding capacity. In terms of equipped international internet bandwidth capacity (Mbps) Telone holds on 19% of the total capacity against Liquid’s 80%. Since the first quarter of 2021, the total sector capacity has soared by 40%. In the LTE base stations space, which is where the internet game has shifted to Telone admits its failure to compete and attributes it to the lack of funding. In the second quarter of 2022, Econet deployed 22 new LTE base stations and some 5G base stations asserting its market leadership.
In terms of financial performance, Telone reported a growth in the topline and operating profit position but a sustained net loss position, which has been case for all the last 10 years. The company acknowledges that government is in communications with the creditors with a view to shift the legacy debt into its own books, but this has not yet materialised. The deep hole in Telone’s books has spooked potential investors and given that fact it becomes even harder to evaluate management since they can easily shift blame of underperformance to legacy debts. The failure to come up with an own credible restructuring agenda and failure to push for debt resolution with shareholder, positions Mtasa in a lower league from celebrated corporate gurus. Sympathy from collegues who shared board sittings and particularly the women constituency out looking for those they look upto, will however carry the day for Mtasa in her post Telone life. Outside of the gloom, Mtasa modernised the state entity by refocussing it in the tech space leveraging existing and new infrastructure. Telone is no longer a fixed telephone company. Although it maintains market leadership in the space, fixed telephone now contributes only 24% to total income down from 90% in 2012. On the other hand broadband revenue contribution has increased from 10% 2012 to 80% in 2021. This digital transformation has helped spur the topline, which is a credit to Mtasa.
Telone Revenue Mix
Had the company not refocussed, income would have continued to dwindle in line with market trends and shifts towards broadband. This too has helped lower the bleeding inflicted by the huge legacy cost. Telone is better positioned today to face the future and claim a fair market share, given its digital focus. It will be paramount for the State to move faster to effect debt resolution and overall restructuring for able parastatals as espoused in the TSP, if the fiscus is to achieve a breathing space in the near term.