Sentech takes R46m knock

Sentech's withdrawal from the retail telecommunications market will result in a R46 million impairment.

Following continued pressure from its shareholders, the company has announced it will discontinue the MyWireless, VAS and BizNet services on 30 November.

In a statement, the company says its controversial and under-performing retail offerings will be terminated as they proved to be uncompetitive and costly.

“Due to the fast-changing nature of the ICT market and entry of well-funded competitors, Sentech has not been able to sustain the momentum and growth of these products and services. In addition, the equipment delivering retail broadband services is now entering the planned redundancy period,” it adds.

The solutions have long been criticised for failing to compete and were marred by poor service delivery. The solutions were also criticised for distracting Sentech from delivering on its mandate.

The company states the poor performance of its retail solutions over the years and the subsequent discontinuation of these services will worsen its operating loss.

“The operations to be discontinued account for the major part of the operating loss, which will stem the bleeding in the following year. We further had an impairment of R46 million for assets impaired related to the discontinued operations. These expenses are non-recurring,” Sentech says.

The move forms part of Sentech's decision to phase out retail products and concentrate on offering a wholesale broadband network as a common platform for all service providers. The decision was taken in September last year, as government made “a strategic decision to phase out MyWireless” from Sentech's arsenal of products.

While Sentech introduced MyWireless and BizNet in 2004, it admits that in the past five years, the solutions have failed to attract a significant subscriber base and have not led to the extension of its network and product offerings.

“These products played an important enabling role in bringing multimedia to the South African market, but were moderately successful,” says Sentech.

Late in 2007 and early 2008, government and Sentech made several promises to get the WiMax service off the ground, but these efforts failed. When little progress was forthcoming, National Treasury criticised the company for squandering R500 million on the service, and ignoring the maintenance and upgrading of the TV signal distribution system.

Despite questions to ITWeb from customers asking when the services would be terminated, Sentech says: “Appropriate notifications have been sent to all customers who will be affected.”

It adds that notification has been posted on its Web site and the call centre is handling customers' queries.

The company has also failed to reveal how much it is currently spending on maintaining the network and how much it has spent on the products since 2004. It has also not revealed how many subscribers it has using the retail products and how much money has been lost on these services over the years.

Furthermore, Sentech failed to reveal how it would use the spectrum allocated to it for the retail services. The company was given a large chunk of the hotly contested 2.6GHz band, which is commonly used for mobile network technologies like WiMax, or LTE.

The state-owned entity is sitting on 50MHz in the band, which was intended to be used for its MyWireless service, and has not given any indication as to how it will use this spectrum.