Telkom chosen to help fund roll-out

Published Feb 16, 2015

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Chris Spillane

SOUTH Africa would push for Telkom to provide cash for a government-backed expansion of broadband internet access to most citizens, Telecommunications Minister Siyabonga Cwele said.

“The roll-out of broadband is quite a costly exercise,” Cwele said on Friday. “Telkom has got its own balance sheet which can meet some of this demand.”

The broadband proposal might cost as much as R98 billion to deliver and would be funded by the sale of mobile frequencies and from the government budget, as well as resources from Telkom, which is almost 40 percent owned by the state, Cwele said.

The spending was likely to be less as the government saved money by shifting public services online, he added.

South Africa is one of the world’s stragglers in internet access with just 3.06 fixed-line broadband subscribers per 100 people in 2013 compared with 10.08 in Brazil, 29.25 in the US and 34.56 in Germany, according to the World Bank.

The ANC has pledged to extend broadband access to every household by the end of this decade, according to its National Infrastructure Plan.

“Telkom welcomes the announcement of the government’s decision to appoint the company as South Africa’s national broadband champion”, and the company would “drive collaboration between government and industry” to set up the network, Jacqui O’Sullivan, a spokeswoman, said.

Telkom fell as much as 2.1 percent on Friday, before closing 1.02 percent lower at R76.90. The stock has risen 10 percent this year, valuing Africa’s largest fixed line phone operator at R40.1bn.

Free cash flow at Telkom in the financial first half to the end of September amounted to R1.7bn, while net debt narrowed by 74 percent to R545 million.

Competitor MTN was exploring the purchase of a majority stake in Telkom, people familiar with the matter said earlier this week. – Bloomberg

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