No signs of profit at Broadband Infraco

State-owned broadband infrastructure operator, Broadband Infraco says it will not be profitable in 2013, nor is it likely to be anytime soon, according to its CEO Puleng Kwele.

The company lead told BusinessTech: “We are not profitable,” adding that, with its mandate – to expand the availability and affordability of access to national and international wholesale broadband connectivity – along with a lack of funding, the prospect remains unlikely.

Kwele said 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.

The chief executive said that her number one priority was to engage with treasury for requirements to meet delivery targets.

To date, Broadband Infraco has put just under 13,000 km of fibre into the ground.

Poor governance

The company has been plagued by poor governance in the past. However, having been appointed to her post in April 2012, Kwele pointed to an improvement within the group’s management structure and ability to deliver.

“I did have an exodus; morale was low, but there is now clarity of direction to what this company is about. We have been able to attract a very good calibre of people,” the CEO said, highlighting the recruitment of a number of professional engineers.

Financial results

The group is currently in a quiet period and is expected to publish its results in August.

Previously, it reported a 32% rise in revenue for the financial period ended March 2012, to R393.6 million, from R297.6 million before.

The group said that it 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.

It highlighted a 67% improvement in earnings before interest, taxes, depreciation, and amortisation (ebitda), although that reflected a loss of R27 million, from a prior loss of R81 million.

A small matter of R100 billion

Kwele estimates that the South African government will need to set aside as much as R100 billion in order to meet its targets for broadband coverage.

The Department of Communications has committed to delivering 100% broadband penetration along with one million jobs by 2020.

Kwele said that, like Eskom and Transnet, Broadband Infraco has the ability to request funding from outside sources, but the company head is reluctant to do so at this point.

“Building a balance sheet is not an overnight thing. I am working on a plan to convince government to fund,” the CEO said.

More on Broadband Infraco

R100 billion needed for SA broadband: Infraco

CFO not suspended: Broadband Infraco

Broadband Infraco lifts revenue by 32%

Broadband Infraco appoints new CEO

Broadband Infraco to address cash position

Broadband Infraco to boost Limpopo network

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No signs of profit at Broadband Infraco