Despite hopes of an independent broadband provider, government has announced Infraco, the new bulk wired broadband provider, will remain a 100% state-owned business to decrease costs.
Department of Public Enterprises director-general Portia Molefe says Infraco will be a schedule two company in terms of the 1999 Public Finance Management Act. This means it will be a "major public entity" in the same league as Eskom and entitled to raise funds on the money market.
Molefe says government's decision was influenced by its experience with private partners in other ventures, as well as its desire to cut telecommunications costs. "The understanding is with infrastructure one needs a lead investor. One also needs to establish excess capacity for future uptake. Our experience is that private partners need to borrow money and that requires a return on investment so high as to prevent lower costs."
Communications director-general Lyndall Shope-Mafole supported Molefe. She added that in her opinion, government should own the broadband backbone in the same way it did the road network which everyone was entitled to use on a "same cost" basis.
Their comments put paid to Indian telecommunications group VSNL's hopes for a 26% shareholding in the company. Earlier this year, public enterprises and finance ministers Alec Erwin and Trevor Manuel announced VSNL, the telecommunications subsidiary of Indian conglomerate Tata, would receive a share in Infraco. They also said Infraco and second national operator Neotel (in which VSNL owns 26% directly) would sign a four-year exclusive contract.
Molefe says Neotel still has its exclusivity period, though this would not apply to a planned $700 million (R5 billion) undersea cable off the west coast, which Telkom is keen to tap.
Recruiting staff
Infraco CEO Dave Smith says the company is operational and its network is already carrying Neotel traffic. He declines to elaborate on Infraco's expected turnover, saying this is confidential. Several media reports have put its likely capitalisation at R975 million.
Smith adds the company is recruiting staff and plans to employ 80 people, including some outsourced staff, in its first year.
"The priority up to now was to get the infrastructure going in order not to delay the Neotel launch," Smith says.
"Obviously there is going to be lots of expansion in the future to establish a nationwide geographical footprint." This includes three points-of-presence in each metro, two in secondary towns and one in every minor town. The state plans to get e-government "through to the very last person" using Infraco, says Molefe.
Public hearings on the Infraco Bill, which will establish the company as a legal state-owned enterprise, will start before the National Assembly's Portfolio Committee on Public Enterprises this morning. They are set to last until 7 August.
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