Telkom, government close in on broadband deal

Telkom is close to reaching an agreement with the government to start a R750-million first phase of broadband roll-out across South Africa , according to two people familiar with the matter.

There had 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% stake, said the sources, who asked not to be identified as the contract has not been finalised.

Telkom had carried out site inspections and studied how to implement the plan in eight districts, one source said.

Telkom could not comment on a government project, the company said. The Telecommunications Ministry did not immediately return phone calls and an e-mail seeking comment.

Telkom shares rose as much as 4.7% on the JSE on Friday, before paring gains to close 2.9% higher at R54.55. The stock is down 15.2% this year, valuing the company at R28.7-billion.

The ANC 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 5000 government facilities in eight district municipalities over three years, President Jacob Zuma said in his state of the nation address on Thursday.

The broadband proposal may cost as much as R98-billion in total, Telecommunications Minister Siyabonga Cwele said in February last year.

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 World Bank figures.

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

"Telkom is not within government structures," said Marian Shinn, the party's spokeswoman on telecommunications.

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

Vodacom, which has the most subscribers in South Africa, said it supported the broadband roll-out programme.

Spokesman Bongo Futuse said: "Vodacom is committed to working with and partnering government and other stakeholders to ensure achievement of the country's broadband goals."