Telkom said to be close to 750m rand state broadband deal

[JOHANNESBURG] Telkom SA SOC Ltd is close to reaching an agreement with the South African government to start a 750 million rand (S$65.6 million) first phase of broadband roll-out across Africa's most industrialized economy, according to two people familiar with the matter.

There have been extensive discussions about the contract between Telkom, South Africa's biggest landline provider, and the government, the company's biggest shareholder with a 40 per cent stake, said the people, who asked not to be identified as the contract hasn't been finalized.

Pretoria-based Telkom has carried out site inspections and studied how to implement the plan in eight districts, one of the people said.

Telkom can't comment on a government project, the company said. The telecommunications ministry didn't immediately return phone calls and and an e-mail seeking comment.

Telkom shares rose as much as 4.7 per cent in Johannesburg on Friday, before paring gains to trade 0.1 per cent higher at 53.03 rand as of 9:54 am local time. The stock is down 18 per cent this year, valuing the company at 27.9 billion rand.

The ruling African National Congress has pledged to extend broadband access to every household by the end of this decade. The government will "fast track" the first phase of broadband roll-out to connect more than 5,000 government facilities in eight district municipalities over three years, President Jacob Zuma said in his annual State of the Nation address late Thursday.

The broadband proposal may cost as much as 98 billion rand in total, Telecommunications Minister Siyabonga Cwele said last February.

South Africa is one of the world's stragglers in Internet access with just 3.21 fixed-line broadband subscribers per 100 people in 2014 compared with 11.46 in Brazil, 30.37 in the US and 29.31 in Japan, according to figures compiled by the World Bank.

The opposition Democratic Alliance said that awarding the broadband contract to Telkom may be "legally dubious" as there hasn't been a transparent tender process.

"Telkom is not within government structures," Marian Shinn, the shadow minister for telecommunications and postal services, said by text message.

"It is JSE-listed, not a state-owned company, and government must deal with it as it does other companies in the sector."

Vodacom Group Ltd, a Johannesburg-based Internet provider and the wireless operator with the most subscribers in South Africa, said it supports the government's broadband roll-out program.

"Vodacom is committed to working with and partnering government and other stakeholders to ensure achievement of the country's broadband goals," spokesman Bongo Futuse said in e-mailed comments.

BLOOMBERG