A merger between Sentech and Broadband Infraco is still on the cards, but will not happen soon, according to public enterprises minister Malusi Gigaba.
Speaking at Infraco's annual general meeting yesterday, the minister said the merger should be the culmination of a process.
“We are finding synergies with the organisations and the merger will be the culmination of a process that we have already begun. We have begun discussions at ministerial, director-general and board levels to try to find the synergies to improve cooperation between the two organisations through entering into a venture agreement.”
He added that the merger is only likely to be considered in the medium- or long-term.
Infraco chairman Andrew Mthembu said going forward there will be closer cooperation with Sentech. “We also have a plan to engage with provinces and municipalities. We are very mindful of the need for us to make a meaningful contribution to the new growth path.”
Creating synergies
In June, Gigaba said during his budget speech that the department will continue to monitor the roll-out of the Infraco broadband network, while working on a strategy to secure the long-term viability of the business.
“In particular, we are exploring strategic synergies between Infraco and Sentech in order to optimise our capacity.”
Gigaba yesterday said the Department of Public Enterprises has been engaging with the Department of Communications so that it can participate in the formulation of the national integrated broadband strategy, as well as pursuing cooperation with Sentech.
“We have given a mandate to the [Infraco] board to create synergies with Sentech for the benefit of both organisations.”
Door open
Infraco generated lower than expected turnover of R297 million, posted a net loss of R207 million, and incurred irregular expenditure to the cost of R151 million in the 2010/11 financial year.
Strategy Worx MD Steven Ambrose previously said the only viable future for the embattled Infraco lies in its privatisation.
“Government will finally have to fold Infraco into Telkom or Sentech, both of which hardly have stellar records, in order to curb losses and make the best of the infrastructure the taxpayer has paid well over market-related amounts for.”
However, Gigaba said privatisation of the company will not happen.
“The fact is that as a result of the government intervention in providing this infrastructure, we have seen the cost of broadband declining, but [Infraco] has not achieved all duties assigned to it.”
He added that government wants to continue providing services successfully and meet all mandates it had set for Infraco.
“Broadband Infraco has not achieved the entire mandate that government established for it, but this does not mean I'm not leaving the door open for privatisation at a later stage. But at the present moment, we have absolutely no intention of privatising Broadband Infraco. The ICT sector is competitive, but this doesn't mean Broadband Infraco needs to be privatised.”
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