On a losing frequency
State-owned Sentech is becoming a predictable and expensive soap opera. But despite the same story for years — red ink splashed across its income statement — its supporters in Pretoria remain as loyal as ever.
Since 2003, Sebiletso Mokone- Matabane’s Sentech has lost R215m. For the year ended March 2007, revenues rose to R729m but the company once again reported a loss, albeit reduced, of R21,5m. The end of the haemorrhaging is not in sight, according to Sentech’s earnings forecasts. The broadcasting signal distributor and wannabe telecommunications operator expects next year’s post-tax losses to be R16,3m.
The company also owes a cumulative R145m to the regulatory Independent Communications Authority of SA (Icasa), the Development Bank of Southern Africa and the state-owned SABC (Sentech’s partner in the abandoned bid for a pay-TV licence).
The losing streak doesn’t appear to faze government, Sentech’s sole shareholder. Despite the ongoing losses, communications department director general Lyndall Shope-Mafole says Sentech is well-run, self-sustainable and meeting its service delivery mandate. She says government will not sell the company.
Of course, this is the same shareholder that Sentech chairman Colin Hickling accuses of stymieing the company’s growth. Hickling says government has prevented Sentech from borrowing from the capital markets to fund its expansion and take advantage of opportunities in SA and elsewhere in Africa.
The lack of funding does not, however, explain Sentech’s poor performance in its telecom business. Its MyWireless broadband service has failed to attract much consumer interest and its revenues have fallen year on year in a booming broadband market.
Says Shope-Mafole: “Sentech is not like MTN or Telkom; it’s not profit driven. Its mandate includes penetrating underserviced communities that may not be commercially viable. So clearly, it’s not competing with the private sector.”
Sentech will be heartened that its funding woes may soon end. National treasury has earmarked R500m for broadband infrastructure spending by Sentech. But Sentech says the allocation falls short of the R1bn it needs. Also, the R500m grant has not yet been transferred — national treasury first wants to agree to a detailed business plan.
Shope-Mafole is confident that once the money is finally transferred, Sentech will do a good job rolling out the wireless network. “I’m confident of that,” she says.
Her confidence may be misplaced. MyWireless is foundering against more spirited rivals such as Telkom, iBurst, Vodacom and MTN. In the past year, the MyWireless business’s revenue has declined 5%, to R23,6m. It’s not known how many MyWireless subscribers Sentech has on its books, but it is under 10 000.
Analysts say Mokone-Matabane could save Sentech from further bloodletting by focusing on existing opportunities in broadcasting instead of eyeing ambitious telecom projects. Sentech’s strength remains its terrestrial radio and television broadcast signal distribution business, which contributed nearly 60%, or R414m, of Sentech’s revenue in the 2007 financial year.
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