Sentech budget slashed

Kimberly Guest
By Kimberly Guest, ITWeb contributor
Pretoria, 20 Feb 2008

State-owned broadcasting signal and wireless communications provider Sentech has seen its financial contribution from government slashed by 44%, according to National Treasury's estimates of national expenditure for 2008.

This is despite president Thabo Mbeki's statement in his State of the Nation address that ICT is a critical priority as both a facilitator and sector in its own right.

"Already, money has been allocated for Sentech to become a wireless Internet wholesaler, as well as finance its digitisation. Working with other governments on the continent and the private sector, we will complete the process to launch the undersea cables," he said.

However, the 786-page expenditure report reveals the organisation is only expected to receive R350 million for its infrastructure projects. In the year under way, it is estimated the company received R625 million.

Sentech's short- to medium-term projects include investments in the East Africa Submarine Cable System and the National Wholesale Broadband Network (NWBN), for which it will receive no assistance. Projects, which have allocations approved, include broadcast digitisation (R150 million) and the 2010 FIFA World Cup (R200 million).

It is proposed the organisation will receive R250 million in 2009/10 and R150 million in the 2010/11 financial year. These will again be allocated to the digitisation and 2010 World Cup projects.

Headed to red

The Department of Communications (DOC) notes in the report that in the year under review Sentech began the roll-out of phase two of the migration from analogue to digital terrestrial television; compiled a business plan for the roll-out of the NWBN; and finalised a strategy and implementation plan for the 2010 World Cup, including the establishment of a second teleport.

The department also notes that Sentech expects a pre-tax loss of R5.9 million for the 2007/8 financial year ending 31 March.

"This will deteriorate to a pre-tax loss of R59.1 million in 2008/9. Sentech's financial position is expected to improve over the medium-term, with the company projecting a return to a pre-tax profit of R87.5 million in 2009/10," the report states.

The DOC says Sentech's broadcasting signal revenue should increase 31%, to just short of R1 billion in the 2008/9 financial year. The company is expected to receive R723 million in the financial year under way.

Return to profitability in the 2009/10 financial year is expected to be achieved by the discontinuation of unprofitable products under the multimedia and carrier of carriers licences.

This will see MyWireless, Biznet and the international telephony business being phased out. A new strategy will be developed for VSAT and continuing the roll-out of the 2010 World Cup infrastructure.

National Treasury advisors on hand at the budget lockdown were unable to explain why Sentech's budget had been cut so drastically.

Related stories:
Sentech ready to roll
Sentech eyes funding by Q1 2008
Sentech desperate for more cash
Sentech to get more cash
Sentech hobbled by funding crisis