Internet parastatal good to go

Broadband Infraco, South Africa's newest parastatal, will break even within three years of its commercial launch tomorrow, its CEO, Dave Smith, has told MPs.

He told parliament's committee on public enterprises that Infraco would not require further equity injections from its shareholders - the government and the Industrial Development Corporation - unless they revised its mandate.

The two owners have invested R1.64-billion in Infraco, which owns 11.4% of the West African Cable System currently building a high-capacity link from Cape Town to London.

"We are performing ahead of our corporate plan. That corporate plan projects break-even in year three of the commercial operation," Smith said.

"We are projecting that, on the back of the existing equity contributions, together with the senior debt package that we are arranging, we have sufficient funding to take this company to break-even."

The company is already undercutting Telkom's wholesale price for bulk internet connectivity.

After tomorrow's commercial launch, the release of its pricing structure would force prices lower across the board, he said.

Infraco was set up at the initiative of former minister of public enterprises Alec Erwin to accelerate the construction of a broadband network that would bring affordable internet access to poor, rural and under-serviced areas, and to improve international links.

Neotel, the country's second network operator, is Infraco's only client, but Smith said 11 more were in the pipeline.

"We are currently running a trial with a large mobile operator - I don't want to say which one because we're still in commercial negotiations - and there are 10 other internet service providers and [value-added networks] who also want [a] trial with us."

Negotiations were far advanced to renew the Neotel contract for five years, and the other major negotiation might be concluded within weeks, he said. Other contracts likely to more than double Infraco's business would probably be concluded early next year.

"The capacities that people are indicating they are interested in are higher than we originally forecast, which is promising."

Infraco is not licensed to sell services directly to private individuals or the state but, from tomorrow, it will be able to sell connectivity to licensed internet service providers, including state-owned Sentech.