NetOne, a major telecommunication firm in the country, has been revealed to be technically insolvent, raising concerns about its ability to continue operations, according to a new report.
In the report released last Friday, acting Auditor-General (AG) Rheah Kujinga stated that NetOne's total liabilities exceeded its total assets by ZWL$32 billion as of 2022. Specifically, the company's current liabilities exceeded its current assets by ZWL$20.9 billion, up from ZWL$20.5 billion in 2021.
"These conditions indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern," Kujinga said, although her opinion on the financial statements was not modified in respect of this matter.
The auditor's findings suggest that NetOne may face challenges in meeting its obligations and continuing its operations in the foreseeable future. This concern is further compounded by the company's recent decline in active subscribers, which dropped by 5.52% to 4,017,167 in the first quarter of 2024. Consequently, NetOne's market share contracted by 6.66 percentage points to 11.84% during the same period.
Kujinga attributed NetOne's woes to its inability to effectively manage debt. The auditor found that the company failed to suspend post-paid customer accounts with outstanding balances 90 days after barring outgoing calls, as per its own debt management policy.
Additionally, the auditor's report highlighted issues with NetOne's financial reporting. The company did not restate its prior year financial statements in accordance with International Accounting Standard (IAS) 8, which led to a modified opinion on the current year's financial statements due to the potential residual effects of non-compliance with IAS 21 'The Effects of Changes in Foreign Exchange Rates'. This affected the comparability of the current period's figures to the previous year.
In response to the audit findings, NetOne has committed to address the unaccounted cash deposits into its accounts and upgrade its software to better capture performance and data.
The revelations in the report raise significant concerns about NetOne's financial stability and its ability to continue operating in the near future, underscoring the need for the company to address the identified issues urgently.
