Infraco losses to continue: FD
State-owned broadband infrastructure operator, Broadband Infraco will continue to lose money for at least another two years, according to its chief financial officer, Ramasela Magoele.
Speaking at the company’s results presentation in Woodmead on Thursday (8 August), Magoele said: “We have made a projection that in the next two years we are going to make losses, but we are working on a turnaround to reduce those losses. In the next financial year, those losses should come down.”
She said that, within three years, the group hoped to be profitable.
Infraco 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.
Puleng Kwele, CEO of Broadband Infraco stressed that the company needed as much as R1.1 billion to upgrade its network, already at 12,800km, over the next three years.
The chief executive 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 for all by 2020.
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.
Tshediso Matona, director-general (DG) of the Department of Public Enterprises said that the struggling company should fend for itself.
“As a commercial state owned company, we believe that the company has to fend for itself. All companies in the portfolio of the Department of Public Enterprises are characterised by that feature. They are commercial and therefore they have to fend for themselves,” Motana said.
However, Motana quickly added that in instances where there is a case to be made for the provision of fiscal support, “we will consider it”.
“We believe that Infraco faces challenges, many of them, not of their own…we have taken it upon ourselves in supporting them in accessing fiscal support via national treasury. We will put in a bid for Infraco to get some support.”
Looking ahead, Infraco pointed to cash in hand of R343 million, adding that it “continues to engage potential funders for additional funds to support its capital expansion programme”.
Infraco sold 70% of its existing capacity on the West African Cable System to the Department of Science and Technology for the Square Kilometer Array project, a transaction valued at R600 million.
“The company will pursue various funding models. Funding will also be sourced commercially, as well as private–public partnerships, including cobuild projects,” Kwele said.
“We have got to be driving a government user-pays model… and the government has got to be an anchor. We are engaging with state owned companies,” the CEO said.
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