Sentech eyes funding by Q1 2008

Johannesburg, 11 Dec 2007

State signal distributor Sentech aims to unlock funding for its long-delayed countrywide wireless broadband network in the first quarter of next year, when it revises the business plan for the project.

The project was announced in May last year, by communications minister Ivy Matsepe-Casaburri, but failed to get off the ground, due to a lack of money. The original deadline set for network deployment was this month.

Sentech initially requested between R600 million and R1 billion to build the network, but the allocation of funds was delayed by, among others, a protracted investigation by government to define Sentech`s target market and ensure it does not compete with private sector players.

In September, finance minister Trevor Manuel proposed that Parliament approves the allocation of additional amounts of money to the departments of public enterprises, communications, agriculture, sport and recreation, in respect of the 2007/08 financial year.

This saw National Treasury allocate R500 million for Sentech to develop the wireless broadband network infrastructure - less than the initial amount requested by the company. However, the Department of Communications said the funds will only be transferred to Sentech once a revised (and downscaled) business plan for the project gains approved.

This morning, Sentech public relations manager Hulisani Rasivhaga said the company is working on a revised business plan, adding the project could now take a "totally different direction".

"We are working on a business plan and talking to all the stakeholders [including the departments of communications and education, as well as National Treasury]," she says, adding that no details are available at this stage.

Challenges persist

Rasivhaga expects the revised plan should be on the table by no later than March next year.

Meanwhile, Sentech did improve its financial performance during the 2006/7 financial year, reducing losses from R76.419 million, in 2005/6, to R21.53 million. Yet the company complained it is still hobbled by funding constraints, preventing it from reaching its full potential.

"Making a profit continues to be a challenge in the absence of a capital injection, and it is difficult for Sentech to achieve its role as a strategic asset of government in creating an inclusive information society," chairman Colin Hickling wrote in the company`s annual report.

He pointed out that the Sentech board has continuously asked for more capital since the company was awarded the carrier of carrier and multimedia licences in 2002.

"Notwithstanding numerous announcements by government, that Sentech would be funded to roll-out a broadband wireless network, no funding has been forthcoming nor an appropriate funding model been finalised. In spite of the various funding models and business plans submitted to the shareholder and treasury, this continued lack of funding has and will continue to negatively impact Sentech`s performance," Hickling wrote.

Another initiative that has suffered from inadequate capitalisation is the digital terrestrial television (DTT) project. Sentech initially asked for R960 million to provide DTT coverage throughout SA, and was granted R405 million.

In March this year, Sentech CEO Sebiletso Mokone-Matabane applied to Parliament to allow the Sentech board to be governed by the Section 2 rules of the Public Finance Management Act, rather than the current Section 3(b) rules. This essentially is an application to upgrade its board status so it can seek alternate sources of funding, not purely from government.

A decision is still pending.