State telecom on the block?

Government will decide this week whether to part-privatise Broadband Infraco.

South Africa’s government will decide this week whether to part-privatise the country’s second-largest fixed-line operator, Broadband Infraco, as the company runs short of cash, two sources say.

Broadband Infraco hasn’t made a profit since it was established in 2010 to deliver cheaper broadband to South African citizens, particularly in rural areas. A sale process would interest Vodacom Group, South Africa’s largest mobile operator by customer numbers, spokesman Byron Kennedy said in comments yesterday, without saying whether he was aware of government plans.

Dark Fibre Africa, South Africa’s largest, “last-mile” fibre specialist by network size, would also consider bidding for a stake, according to a person familiar with the matter, who asked not to be identified as the closely held company’s plans are private.

Telkom, the country’s former landline monopoly 40% owned by the government, held talks with Infraco but couldn’t reach agreement, said spokesperson Jacqui O’Sullivan, without giving further detail.

The company has approached two state-owned development institutions, the Development Bank of South Africa and the Industrial Development Corporation, for additional funding, documents seen by Bloomberg show. Broadband Infraco made a loss of R91 million in the year through March, and its cashpile fell to R81.7 million by June 30 from R267 million 12 months previously, the documents showed.

The potential sale of a stake in of Broadband Infraco to a private company would follow a report commissioned by President Jacob Zuma that found that South Africa should consider selling stakes in state-owned companies to private entities to improve their finances and tackle operational failures. The government is considering merging two stateowned airlines and selling off a stake in the enlarged carrier to private investors, Finance Minister Pravin Gordhan said in his budget speech in February.

South Africa’s telecommunications industry regulator announced the auction of new broadband spectrum last month to address a shortage of highspeed internet in Africa’s most industrialised economy, although the move was later opposed by the telecommunications ministry. The country is one of the global stragglers in terms of broadband provision, with 3.21 subscriptions per 100 people in 2014, compared with the global average of 10.56, World Bank data show. Wireless operators including Johannesburg-based Vodacom are seeking new spectrum to add more wireless customers in a market that’s struggling to grow. The unit of Newbury, England-based Vodafone Group Plc, had pursued internet provider Neotel Pty Ltd., though was eventually forced to abandon the deal amid regulatory pressure and legal action by competitors. Neotel was instead bought by Econet Wireless Group unit Liquid Telecom. – Bloomberg