Cap still in hand
Sentech CEO Sebiletso Mokone-Matabane has hit back at the company’s critics, saying the state-owned signal distributor has what it takes to build a wireless broadband network — if someone would just give it the money to do it.
In an interview, Mokone-Matabane made an impassioned plea to national treasury to provide Sentech with the money it needs — R4,1bn, according to its business plan — to build the wireless network. To date it has received just R500m. Officials at treasury are said to be concerned about the ability of Sentech to build a viable Internet business, especially in light of the failure of its MyWireless service. Sentech has also not reported an operating profit since 2003.
Mokone-Matabane blames the lack of funding for the failure of MyWireless, which is estimated to have only about 2000 subscribers (Sentech won’t reveal customer numbers despite the fact that it is a state-owned enterprise).
Other telecom companies say privately that Sentech botched the launch of MyWireless and that management should shoulder the blame.
But Mokone-Matabane says the limited scope of the MyWireless network — Sentech was not able to raise the money to expand the network beyond a few dozen base stations — meant users chose wireless alternatives from Vodacom, MTN and iBurst, which came to market much later.
The idea was that the company would reduce its reliance on revenues from broadcast signal distribution.
Once it had received the licences it needed, it asked government for about R3bn in funding to build a wireless network. “There was always the expectation that the shareholder would come to the party,” Mokone-Matabane says. “At no point did national treasury say it would not fund Sentech.”
While it waited for funding, the company got the go-ahead to borrow R153m from the Development Bank of Southern Africa, which it used to start building the MyWireless network.
To secure additional funding, Sentech explored the option of forming a public-private partnership and engaged with a number of interested private-sector players. German consulting firm Datekon helped Sentech refine its business plan. “They thought we had a bankable business plan,” Mokone-Matabane says. “We approached several funders, including banks, and they agreed to fund it without government guarantees.”
However, government blocked the plan at the last moment. “They wanted to keep [the network] wholly government-owned.”
Mokone-Matabane says she does not understand how treasury officials can call the business plan into question after “experts” had told the company that the current wireless broadband plan was bankable and that financial institutions were prepared to fund it.
Even if it does secure the funding it needs, Sentech will face an uphill battle. The mobile operators already offer widespread 3G coverage at relatively low prices, which could undermine government’s strategy for Sentech to use these profits to provide broadband access to schools and hospitals in unprofitable rural areas.
“We believe the network will make money but given the need to provide services to underserviced areas, government would have to make a contribution,” Mokone-Matabane says.
She says Sentech has learnt from the mistakes it made with MyWireless. This time, instead of engaging directly with consumers, it will operate a wholesale network and make its products available through retail partners. It will build its network using a new technology called WiMax — its previous network relied on technology that is not commonly used.
The company will also not proceed with a network roll-out until it is confident it will secure the funding. “We don’t want to make the same mistake as before by having limited coverage,” she says. “We want to bed down further funding to extend our roll-out.”
Mokone-Matabane lashes out at critics who say that Sentech should stick to its knitting — signal distribution for broadcasters — and concentrate on the switch from analogue to digital terrestrial television. “That would be like having a mobile licence and using it only for voice. It doesn’t make sense.”
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