South Africa’s Broadband Infraco posts another loss

Mergers, Acquisitions and Financial Results

State-owned broadband infrastructure operator, Broadband Infraco has reported a 40% decline in revenue for the financial year ended March 2013, to R237.4 million, citing shrinking volumes of business from Neotel.

The group extended its operating loss to R181.1 million, from R95 million before, but noted that it invested R155 million during the course of the year.

The company said it generated a positive cash flow of R10.2 million, and achieved an unqualified audit, with poor governance having haunting the company in the past.

Cost of sales decreased by 37% to R172.2 million, Infraco said, but capital projects of R109 million were capitalised.

Despite a loss of business from Neotel, the group said it has added to its customer base. In 2012, the group reported a 32% rise in revenue to R393.6 million, and generated R52 million from operating activities, although it announced a loss for the year of R95 million, from a loss of R206 million in 2011, and R40 million in 2010.

The company has a mandate to bridge the digital divide and to roll-out “broadband for all” in terms of universal access.

Broadband Infraco said it already has an extensive network of 12,800 km of fibre, 151 customer termination points, traversing all nine provinces, in most major cities and towns.

The group said that 75% of the targets contained within its Shareholder Compact were met or exceeded.

It said that seven access points were established to enable third parties to connect to its network.

The group said employment costs increased 8% as it filled critical skilled positions, and appointed more experienced technical staff.

Looking ahead, Broadband Infraco said it will work with its shareholders the Department of Public Enterprises & the Industrial Development Corporation to provide inputs to the (draft) National Broadband Policy.

This policy, it said, will clarify the roles of the government, other ICT SOCs and the private sector in developing world-class broadband infrastructure in the country collaboratively.

“Broadband Infraco has taken a multi-year view in planning for the rollout of its capital expenditure programme, to ensure commercial sustainability of the company as well as to meet the socio-economic objectives of government,” it said.

The company said it will pursue various funding models. Funding will also be sourced commercially as well as Private Public Partnerships including co-build projects.

Broadband Infraco CEO, Puleng Kwele recently estimated that the South African government will need to set aside as much as R100 billion in order to meet its targets for broadband coverage.

Kwele was also outspoken on the funding requirements needed by the group, noting that in the five years of its existence, Broadband Infraco had only received a total of R1.8 billion from government.

“Its not sufficient to do the work we are required to do…R1.8 billion is nothing, it’s a drop in the ocean in this industry,” she said.

“Nobody should tell me that government shouldn’t invest. I don’t buy the idea that fiscus is really tight,” Kwele said.