Sentech needs its eyes checked

[By Lloyd Gedye]

They say hindsight has 20/20 vision. In that case, Sentech needs to get its eyes checked. The parastatal announced the details of its plan to spend R1,2bn of taxpayers’ money building a new national wireless broadband network over the next three years.

With Sentech’s previous failings in the wireless broadband and telecommunications sector still looming large, the question has to be asked why government is allowing it to once again diversify from its core responsibilities, namely signal distribution.

The announcement has also prompted a response from the GSM Association (GSMA), a global body that represents most mobile operators worldwide. GSMA has called the decision to build a rural wireless broadband network using the 2,6GHz spectrum band “really silly” because the spectrum band is best suited to dense urban areas and has called for the parastatal to focus on the digital to terrestrial migration process.

It was just more than a year ago that the Mail & Guardian reported that Sentech was a “basket case” facing huge financial losses and a leadership crisis. A task team had been appointed at the time by former communications minister Siphiwe Nyanda to draw up a turnaround strategy for the troubled parastatal. It emphasised the fact that Sentech’s “thorny” financial position had been caused by its unprofitable telecoms products, which were noncore revenue streams.

In 2007 the Sentech board took the decision to discontinue all non­performing telecoms products after a request from government. These included Sentech’s MyWireless, Biznet and VAS services. Sentech’s 2008/2009 and 2009/2010 annual reports showed that since the decision was taken these services had cost it R385m while bringing in only R39m in revenue. They were terminated in 2010, giving the new Sentech management the time to focus on improving the parastatal’s solvency.

Numerous industry players who spoke to the M&G at the time said that Sentech had a massive opportunity to become a major player in the wireless broadband market between 2002 and 2003, but it had “missed the boat”.

Clawing back
“It’s too late to claw back into that market now,” said an analyst. “In 2002-2003, it had a great opportunity to enter the wireless broadband market and it let it slip between its fingers.” The task team maintained that Sentech’s degeneration into its loss-making situation began with the awarding of telecoms licences and the organisation’s attempts to launch its telecoms services without adequate funding, robust business plans and well-thought-out strategies.

Let’s hope that this is not the case once again. To be fair, Sentech’s new CEO, Setumi Mohapi, and chairman, Logan Naidoo, talked a good talk this week when outlining its corporate plan for the medium term. If they are to be believed, Sentech has learned from its previous failings in the wireless broadband market and is not seeking to compete against private players.

Its strategy is to roll out a wireless broadband network in rural areas at government’s expense to service primarily rural schools and then to recoup only the operational costs not the capital casts of rolling out the network. Roll-out is expected to begin in the third quarter of this year and will be completed by March 2014. A total of 27 578 schools have been identified as beneficiaries of the network, with 60% of these in KwaZulu-Natal, the Eastern Cape and Limpopo.

It appears that the wireless broadband strategy is being driven by communications minister Roy Padayachie, which is hardly a surprise considering that he served as a deputy minister under former communications minister Ivy Matsepe-Casaburri, whose dismal reign also included plans for Sentech to roll out a national wireless broadband network in the rural areas. Matsepe-Casaburri’s policy focused on the roll-out of e-government in the rural areas and Naidoo stressed these benefits again this week. However, Matsepe-Casaburri’s initial plans failed to come to fruition because national treasury didn’t approve the parastatal’s business plans for the wireless network after it had requested R3,8bn.

“Thank God for treasury,” said one industry insider at the time, when questioned about Sentech’s failure to get its business plans approved. So, what has changed?

Why are national treasury and the communications department giving this parastatal the opportunity potentially to waste more taxpayers’ money? Surely by now Sentech has learned its lesson about playing in noncore markets?

Mohapi moved to assure South Africans that Sentech would not repeat the “mistakes of the past” and that he was confident that it was feasible for Sentech to recover the operational costs of the network. “This is a new phase for Sentech,” said Naidoo at this week’s briefing. Let’s hope we don’t have another billion-rand mistake on our hands.

  • Lloyd Gedye is a senior business journalist at the Mail & Guardian
  • Visit the Mail & Guardian Online, the smart news source
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  • http://www.thinkingoutloud.co.za Garth Michel

    The answer is quite simple. The brother of Zuma’s uncle’s girlfriends, son’s best friend needs to get some easy cash and needs a nice contract to put in a tender for.

    Betting companies should start giving odds on whether or not government plans will fail and when they do, will be due to tenderpreneurship, but they’d probably lose money.

  • The_Librarian

    Just want to tell Sentech that they can be off. Wasting our money nogal…. then they’ll have the cheek to offer one of several excuses…

    I’m sick and tired of individuals/companies looting our hard-earned tax money for their own enrichment/gain. When will this nonsense stop?

  • The_Librarian

    Besides, who still use Sentech’s wireless offerings? Can we have a nationwide survey on who still uses their services?

  • http://www.clickclickboom.co.za AlanBen

    So who is going to do this, or do you not agree that bring the Internet to schools and clinics is important? And what about the people who live outside of the 30km profit zone of city centres? Do you know how many people this live in peri-urban areas?

    I agree that the risk of tender enrichment is great, but this is one that will test the mettle of Roy Padayachie.

  • Bonga86

    “our hard-earned tax money” really

  • ticia

    @The_Librarian no one uses Sentech’s wireless offerings because they no longer exist. The last time I heard, service like screamer had been pulled off the market.

  • TMan

    Agree with @AlanBen’s posting. To argue against Sentech’s investment in rural broadband network is to condemn rural youth to continued exclusion from the knowledge economy. So just like roads, electricity grid & water pipelines, government must invest in a telecoms network that will allow rural dwellers to access education & job opportunities in this digital age. The commercial operators are just not interested in the rural market, rightly or wrongly.

    And I’m really tired of self-important journalists/commentators who think they’re the only taxpayers. We all (including rural dwellers) pay taxes, probably more than you.

  • http://www.cablemap.info Greg

    @AlanBen Agreed. I just hope they can get it right. They should just hire someone with experience to get it done. From what I’ve picked up, when Ethekwini Municipality laid their Metroconnect fiber product, they brought a specialist in from overseas to get the job done, and then outsourced oungoing maintenance of the network to Didata. Probably cost more, but it’s cheaper than having it fail!

  • Maqhekeza

    While this article reminds us about our past and raises good questions it falls short in producing alternatives. Today we are faced with a challenge of providing services to all (including rural communities). Who must do it?? Should we wait for private operators to roll out to poor communities once they have identified profit opportunities?? We have been down this road before and it all boils down to Free Market Fundamentalist and Pro Developmental State Supporters. We can all agree that we are lagging behind our equals in rolling out services and pricing.. Markets/Operators left alone have failed to deliver universal services nor price corrections. Other countries are starting to include acces to broadband as a human right and we can’t even give the poor few services let alone access.

  • tom

    Here here, comrade Maqhekeza.

    Our state is dealing with none profitable “CAPITALIST”, they only propogate pesimsm. Do we stay in third world or did we not move up on GDP scale. Picture, We want our children to be Dr, Law, Scientst but do not want them to go to school. How ignorant have we all become. If we look at Sentech, the staff has commitment to loose their tax money, come on guys….

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