Broadband Infraco, the state's wholesale broadband arm, is exploring funding options as it needs additional capital to contribute to SA's goal of universal broadband access by 2020, it was revealed during the budget 2014 address today.
The company, which falls under the Department of Public Services and Administration, will also have to significantly invest in its network to address end-of-life needs, as well as technology upgrades.
Despite the need for a capital injection, National Treasury's Estimates of National Expenditure document shows the department has not transferred any money to the entity since the 2010/11 financial year.
Last year, the company said revenue dropped 40%, to R237 million, because of "shrinking volumes of business from Neotel from the end of rights-of-use". It has grown its customer base from seven to 11 customers during the year and received an unqualified audit.
Although it generated positive cash flow of R10.2 million and its cost of sales dropped 37% (to R172.2 million), gross profit fell to R65 million, a year-on-year decline of R54 million. Its operating loss increased from R95.2 million to R181.1 million and it expects losses for the next two years.
In July, its CE Puleng Kwele said government would need to invest up to R80 billion more in the entity in order for it to fulfil its state-sanctioned mandate. She noted National Treasury had invested just R1.8 billion in Broadband Infraco since its inception five years ago.
"Broadband Infraco continues to explore funding options and institutions to address its funding gaps in terms of capital investment to ensure that its network meets the service level requirements, reach, and performance of its existing and future customer base," notes National Treasury's document, handed out to journalists ahead of today's budget speech by finance minister Pravin Gordhan.
Broadband Infraco was established in 2007 as a state-led intervention to introduce competition in the telecommunications market and contribute to increasing access to broadband services, including in under-serviced areas. It launched in November 2010.
The entity has invested in a national long distance fibre-optic network, building on the foundation of the fibre-optic assets deployed by Eskom on power transmission lines and Transnet on railway lines. It has 13 125km of fibre in the ground.
In addition to the expense of rolling out national connectivity, the other major cost component has been into international connectivity, which includes the rollout of the West Africa Coast Cable System.
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