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Govt considers new approach to Broadband Infraco, Sentech merger

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 06 Dec 2021

A process that would potentially see Broadband Infraco (BBI) acquire signal distributor Sentech is on the table, as government looks to accelerate the merger of the entities.

This information came to light during a briefing by the Department of Communications and Digital Technologies (DCDT) and BBI presented to the Portfolio Committee on Communications in Parliament last week.

Responding to ITWeb’s questions about how such an acquisition would work, the DCDT says “it is still in consultation process [sic] and analysing the case, and has not reached the final decision in this regard”.

It explains: “The stated positions of government based on policy pronouncements relating to the rationalisation of the state-owned entities have not changed. Under the portfolio of the Department of Communications and Digital Technologies, we are paying attention to entities that will be repurposed and/or merged to make them fit for purpose to deliver more value to SA citizens.

“To achieve this, consideration must be given to the harmonisation of the relevant and affected entities to eliminate fragmentation and bring coherence for effective service delivery.

“There are critical consultations under way that form part of the necessary stakeholder engagements as we work towards the viability of the merger of BBI and Sentech. Other areas of work include focusing on the relevant provisions of the Companies Act on acquisitions and mergers to achieve the intended goals in an expedited manner.”

According to the DCDT, substantial updates will be provided to the media and the public on the progress it’s making as soon as it is ready to do so.

Plans to merge BBI and Sentech have been in the pipeline for some time now, backed by the department’s predecessors. The merged entity will form the State Digital Infrastructure Company, as previously indicated by former minister Stella Ndabeni-Abrahams.

Last October, it was revealed that plans for the merger were ongoing.

The coming together of the entities is also envisaged to ensure BBI and Sentech, when merged, could achieve enhanced growth in terms of revenue and profitability than they would have in their current form, as separate entities.

Briefing the portfolio committee last week, communications deputy minister Philly Mapulane said the merger has been an ongoing process, explaining that it results from the presidential commission on state-owned enterprises.

He indicated that communications minister Khumbudzo Ntshavheni directed that the two entities take a different course of action in order to accelerate the process.

Instead of amending legislation, which will go through a Parliamentary process, Mapulane said Ntshavheni recommended the best and quickest route is to explore an option of acquisition.

“BBI should acquire Sentech,” he said. “The reason for this is that when you look at the two legislations (enabling legislation), BBI legislation is quite empowering and does facilitate that the new entity can perform both the functions/activities that are being performed by BBI as well as Sentech. That is the rationale behind seeking to acquire one by the other.”

However, the deputy minister noted the matter is still ongoing within the department. "We anticipate that if everything else goes according to plan, we might finalise this process by the end of this financial year.

"It is an intention," he added. "Some may argue that we are being too ambitious, but as of now that is the target that we are working that we can finally have the two entities merging."

Andrew Matseke, CEO of BBI, added that having looked at the timelines for the completion of the process, as well as the original approach, which would have required that the Broadband Infraco Act and Sentech Act be replaced by a new law, which was going to take time, the minister looked at the option of BBI acquiring Sentech.

“That approach is informed by the strength that is in the BBI Act, in terms of its mandate, and that if this approach works out, it will shorten the process of the merger by taking away the need to draft a brand new piece of legislation.

“We are working on that approach at the moment – the department as well as the boards of BBI and Sentech, and the intention from the ministry is that we need to complete this process before the end of this current financial year. That’s the target we are working on,” said Matseke,