Sentech has squandered R500 million on its retail My Wireless service that should have been spent for maintenance and upgrading of the TV signal distribution system, national treasury deputy DG for public finance Andrew Donaldson says.
An unusual three-way briefing was conducted before the Parliamentary Portfolio Committee on Communications this morning, with Sentech, the Department of Communications and the National Treasury, in an attempt to find a solution for the national signal distributor's funding woes.
Sentech has been complaining for the past four years that it has not received adequate funding to upgrade the analogue TV signal system to digital terrestrial TV, with the switch-on due to occur on 1 November this year.
"...(Sentech) has depleted R500 million that should have been used on maintenance for its TV signal network," Donaldson said. He added that, in terms of Sentech's mandate and funding model, the tariffs it charged broadcasters to carry their signals included the cost of the maintenance of the system, which he asserts has been whittled away on the MyWireless service instead.
"MyWireless has played a catalytic role, but let's face it, it's only achieved 5 000 subscribers and it has been overtaken in this fast-moving industry by private companies with far stronger balance sheets than Sentech has," he said.
Private sector competition
Donaldson took Sentech chairman Colin Hickling to task over his comments that, since Sentech's mandate had been expanded to beyond signal distribution, only that funding would automatically be made available.
"It does not go without saying that funding will be allocated. Funding has to be made available in terms of the law and appropriations, which are based on advice from the National Treasury to the minister of finance, who - in turn - takes it to Parliament," he said.
Sentech, which was represented by its CEO Sebiletso Mokone-Matabane and its CFO Siddique Cassim, emphasised that it had to operate in a policy vacuum, where - although the mandate had been expanded from purely TV signal distribution to offering other services - it had been forced to operate against private companies that were far more flexible and had better funding in the various competitive markets.
Hickling claimed the reason it introduced the retail MyWireless product was due to a recommendation by an investigation that said the company could not survive on signal distribution alone. Mokone-Matabane said the reason Sentech's 2003 business model combined the roll-out of broadband services in the retail, wholesale, urban and rural markets was because of funding and high gearing ratios. This was also the first year that the MyWireless offering was released.
However, Donaldson again disputed the wisdom of Sentech's MyWireless products and said that treasury had never been informed of this investigation.
Harry Matabane, the DOC's deputy director-general for finance, said in his submission that his department did not understand how the National Treasury could have allocated funding for broadband Infraco and not given Sentech the funding it needed.
"While we are not opposed to Infraco, it did not have a legislative mandate, while Sentech has one and a proven track record. I am worried about the message National Treasury has sent out," he said.
Members of Parliament are currently questioning the three parties.
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