ESKOM TAKES A R804 MILLION LOSS ON ITS FIBRE ROLL-OUT

Mergers, Acquisitions and Financial Results

While Eskom Enterprises has posted a R804-million loss due to its expenditure in 2003 on telecommunications roll-out, its march into Africa goes on a pace in 33 countries.Its losses arose from an R800-million programme to install a 4,800km fibre-optic cable network in South Africa for the Second National [Telecoms] Operator (SNO), and R154-million in unrecovered expenditure in Telkom Lesotho, where it is the major shareholder.

Apart from its large investment in telecoms in South Africa, Eskom Enterprises spent R581 million on this sector in Lesotho in 2003. This included a R100-million investment in Econet EZI-CEL. Now in its second year of operation, Econet has already secured 35,000 subscribers or 40% of the market share. These subscriber figures are unlikely to generate the kind of returns required to repay this investment.

Eskom Enterprises’ inability to generate business from its telecoms infrastructure in South Africa is viewed in the telecoms industry as a lost opportunity. The Ministry and Department of Communications has failed to license the SNO over the past three years, while seeking a large international player to take a 51% interest. It has announced two black economic empowerment consortia, CommuniTel and Two Consortium, will take a 13% portion each of this shareholdoing while Government retains a 25% holding.

Gcabashe told Business Times this week that the major part of Eskom Enterprises’ expenditure had been the roll-out of "very current technology" using fibre-optic cabling on electricity power lines, to provide voice and data communications. He dispelled any fear that convergence legislation would impede this process: "It is an inevitable technical development that you cannot stem".

Sunday Times