Local investment vehicle Augustus Capital is set to acquire struggling mobile telecommunications operator Telecel Zimbabwe in a US$175 million transaction under the company’s corporate rescue programme, a move expected to transform the country’s telecommunications sector.
The proposed acquisition forms part of Telecel Zimbabwe’s corporate rescue proceedings and is aimed at restructuring the operator, settling legacy debts and restoring the company’s long-term viability.
Augustus Capital was established as a special purpose investment vehicle specifically to participate in Telecel Zimbabwe’s restructuring and acquisition process.
Under the proposed deal, Mutapa Investment Fund will reduce its shareholding in Telecel from 45 percent to 15 percent, while Augustus Capital will acquire the remaining portion of Mutapa’s stake together with the 40 percent stake currently held by Empowerment Corporation.
The acquisition is supported by a capital financing facility of up to US$127 million secured through Ecobank, which will become available once creditors approve the corporate rescue plan.
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Part of the funding will finance a major network modernisation programme expected to cost approximately US$89 million.
Sources familiar with the transaction said Augustus Capital has entered into agreements with ZTE for the supply of telecommunications equipment valued at US$60.5 million, while Satewave Technologies has been contracted to undertake network rollout services worth US$28.5 million.
The investment is expected to finance the deployment of approximately 1,200 new network sites, with equipment manufacturing and delivery expected to take six months before a further six-month rollout period.
Revenue projections under the rescue plan are based on expanded LTE coverage, improved spectrum utilisation and subscriber growth once the upgraded network becomes operational.
Telecel Zimbabwe will continue operating under its existing telecommunications licence, which has approximately seven years remaining.
The proposed rescue plan also seeks to preserve employment at the mobile operator.
According to documents seen by TechnoMag, all employees will remain in service and continue receiving salaries and accrued benefits throughout the corporate rescue process.
The proposal notes that, under liquidation, all employees would lose their jobs immediately and would only be entitled to a maximum of approximately three months’ salary, subject to available funds.
The corporate rescue plan also offers improved recoveries for creditors compared to liquidation.
Trade and concurrent creditors are expected to receive 40 cents for every dollar owed, while the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) is projected to recover approximately 61 cents in the dollar through payments covering historical licence fees and future obligations.
Under the proposed arrangement, Mutapa Investment Fund and Empowerment Corporation will receive nominal consideration for their existing shareholdings while shareholders with outstanding loans to the company will receive seven cents in the dollar and collectively retain a 15 percent equity stake in the restructured business.
The restructuring is being undertaken in terms of Zimbabwe’s Insolvency Act, which places Telecel under corporate rescue protection.
Section 126 of the Act imposes a moratorium preventing creditors from instituting or continuing legal proceedings against the company without the consent of the Corporate Rescue Practitioner or the High Court during the rescue process.
The protection is intended to provide Telecel with sufficient time to restructure its operations and implement the rescue plan.
The rescue plan will become legally binding once approved by the required majority of preferred creditors in accordance with Section 144 of the Insolvency Act.
Industry analysts say the transaction could significantly alter Zimbabwe’s telecommunications landscape by injecting fresh capital into Telecel while bringing in a strategic regional telecommunications partner capable of expanding the operator’s market presence.
If approved, the restructuring is expected to be implemented over the next 24 months, during which Augustus Capital will oversee Telecel Zimbabwe’s financial and operational turnaround while settling legacy debts and repositioning the company for sustainable growth.
