Telkom won’t foot bill for broadband
But govt expects it to align network rollout plans
MINORITY shareholders in Telkom will be relieved to learn that the company does not have to bear the burden of the entire bill for the R98-billion national broadband rollout project.
This week, finance minister Nhlanhla Nene said the government would inject R1.1-billion into the plan over the next three years — but this still leaves question marks over how the rest will be funded.
Telkom, which has already invested in building a broadband network, may also be spared from contributing financially.
This week, Siya Qoza, spokesman for telecommunications minister Siyabonga Cwele, said a final contracting arrangement was being nailed down between the government and Telkom, and there would be numerous sources of funding.
“These would include an in- jection by government and the use of Telkom funds,” he said.
But when pressed for clarity, Qoza said: “We’re not asking Telkom to come up with new funding to fund this.”
The government, he said, expected an alignment of Telkom’s own infrastructure rollout plans “that come from its business plan and licence conditions that it is expected to pursue” and the government’s programme.
About two weeks ago, it seemed a showdown was looming between Telkom and the government over the costs of the broadband plan.
Then Cwele sparked concern over the extent to which Telkom might have to reach into its pocket, when he said Telkom’s balance sheet was strong enough to handle part of the estimated R98billion cost for the project.
But Telkom CEO Sipho Maseko, who has worked hard since his appointment two years ago to regain investor confidence and keep the government from meddling with Telkom’s commercial interests, immediately dismissed the suggestion.
“Government are the ones that will be paying for this. That is why we need to have the appropriate commercial agreement between us and them,” he said.
But he added: “I think what [Cwele] meant to say is that Telkom has the infrastructure and instead of doing a greenfields project, duplicating infrastructure and having to capitalise somebody, rather work with somebody who already has the infrastructure”.
Maseko said the broadband project could contribute at least 2.5% to national economic growth, and provide Telkom with a platform to offer broadband using a range of technologies.
Telkom’s stock touched an eight-year high of R82.28 on the day on which Nene gave his budget speech, suggesting the company’s shareholders were relieved by the government’s commitment. The share eventually closed at R80.02.
However, questions have been asked about how the government picked Telkom as its lead partner in the mega-project. DA leader Helen Zille has even threatened to take the government to court over the fact that the project had not been put out to tender.
One of the other concerns is that Telkom is the lead partner in the project despite the fact that a more obvious partner would be Broadband Infraco, a 100% stateowned company. However, Qoza said other government agencies were being “rationalised” to remove duplication.
Thanks to Maseko, Telkom has a much stronger balance sheet than a year ago. At the last count, it had reduced its debt by 74.1% to R545-million and increasing free cash flow by more than 5 000% to R1.7-billion during the six months to the end of September 2014.
It also boasts a 147 000km fibre- optic network, which is greater than any other telecoms company in the country.
As part of the broadband plan, Telkom will start by deploying broadband to 1 296 government institutions in eight district municipalities (places which are also pilot sites for the National Health Insurance programme) and to 972 schools by March next year. A policy on broadband spectrum use will also be completed by March next year, according to the National Budget Review 2015, which was published this week.
According to the broadband policy, government wants to provide a 10-megabits-per-second connection, which it would scale up to one gigabyte per second by 2030. Healthcare facilities and the public are in line for a broadband boost to facilitate e-health, e-governance and e-education services.
Trade unions Solidarity and the Communication Workers Union (CWU) were sceptical of the project.
Marius Croucamp of Solidarity said they did not expect this project to yield profits for Telkom, other than to strengthen its monopoly.
Croucamp said perhaps Telkom had not expected the task.
‘‘Telkom’s cost-cutting strategy and their [plans to] outsource is not in line with a company that is preparing to roll out broadband on a large scale.”
We are not asking Telkom to come up with the new funding to fund this