The Zambian government has approved the conversion of all debt owed to it by the Zambia Telecommunications Company (Zamtel) into equity.

Acting Chief Government spokesperson Vincent Mwale said Zamtel owes the government over K1.5 billion.

Mwale said at a press briefing in Lusaka that the decision to convert the debt into equity was made by Cabinet and is meant to "clean the balance sheet of Zamtel" and make it profitable and attractive for investment.

Zamtel is a government-owned telecommunication company and is the country's smallest operator with less than two million subscribers.

Mwale said the conversion of the debt into equity will make Zamtel more viable and enable it attract investment without relying on government guarantee to obtain financing for expansion of the network.

"Government has continued supporting the existence of such companies in view of the strategic nature to the development of the country," Mwale said.

In February last year, the Auditor General's report showed that Zamtel faced the very real prospect of closure as it had not made a profit since it was taken over from Libya's Lap Green Networks in 2012. Lap Green Networks had purchased the company in 2009 for $257 million.

However, the Zambia's current administration claimed the company was wrongly sold to the Libyans by the previous administration.

Recently, the government said it was planning to borrow $300 million to recapitalise the company to enable it to compete with private operators MTN Zambia and Airtel Zambia.