Broadband Infraco's corporate plan for 2016-21 and its integrated report for the 2014-15 financial year that have been tabled in parliament, make it clear its executives believe it is preferable for the company to be acquired as a going concern to preserve its value and assets.
Telecommunications and Postal Services Minister Siyabonga Cwele confirmed last month that Telkom and Broadband Infraco were in discussions over possible collaboration as part of the government's restructuring of state entities to remove duplication. But according to Broadband Infraco's corporate plan, the project goes much further than collaboration and involves the merger of the two entities.
Broadband Infraco anticipates that the merger would take 12-18 months to finalise. It has a 14,676km footprint of fixed-line infrastructure while Telkom has more than 147,000km of fibre.
The company notes in its 2015 integrated report that, in its view, "Rationalisation would entail a consolidation of the state's broadband assets under one umbrella to form a national broadband network that would provide wholesale services on an open-access basis through a state-owned company."
The first phase of this rationalisation process should involve close collaboration between state-owned companies and phase two by due diligence investigations, the development of a national broadband implementation plan, and the incorporation of the new broadband network company.
Broadband Infraco was more than six months late in tabling its 2014-15 financial statements because of the concern by its auditors over its going concern status. The company lost R245m in 2014-15, compared to the previous R144m loss on revenue of R366m (R302m).
The cash-strapped company has been on a cost-reduction drive, and has had to cut back or defer capital projects, which have been limited to critical refurbishment and maintenance. It has projected capital expenditure of R105m in this financial year for "urgently required" work on its telecommunication connectivity infrastructure, but only if it received the necessary funding from the government.
The integrated report said that Broadband Infraco had applied for a recapitalisation of R3.4bn over the medium-term expenditure framework, as well as a R698m government guarantee. However, this was substantially trimmed down in the corporate plan, which noted that R90m was needed for the company's short-term cash and working capital requirements by the end of last month; R105m for urgent refurbishment work on its ageing infrastructure; and R50m for the Neotel arbitration payment in June.
A government guarantee of R246m, the plan said, would "mitigate the going concern risk" of the company and allow it to source funding from banks.
Source: Business Day
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