Is a government-Telkom fibre deal on the way in South Africa?

Is a government-Telkom fibre deal on the way in South Africa?

The South African government isn’t interested in selling its 40% stake in number three operator Telkom – in fact it may soon partner with Telkom on rolling out broadband products.

That’s the big story from a number of outlets, notably Bloomberg, which points out that, even though there have been, and still are, quite a few potential buyers hoping to bid for Telkom’s assets, it seems that Telkom and the South African government are now in advanced talks to partner in rolling out broadband products.

Assuming it goes ahead, a partnership could involve Telkom’s Openserve fibre unit, the government’s Broadband Infraco and broadcast transmission services provider Sentech, according to Minister of Communications and Digital Technologies Mondli Gungubele.

One obvious target for the new partnership, suggested by Gungubele, would be to assist the government in its aim of connecting 80% of South Africans in the next three years. For the moment, however, the government proposal is short on detail.

It’s true that together these potential partners could offer an interesting connectivity proposition. Openserve operates around 170,000 kilometres of fibre and legacy landline copper cables. The government’s Broadband Infraco unit manages 14,862 kilometres of fibre; it is the second-largest fibre network operator in the country. However, what all this means for Telkom’s previously expressed interest in selling a stake in Openserve is unclear.

Telkom also has a number of financial issues to resolve. It suggested earlier this year that a potential asset writedown of about US$740 million may be on the cards.

In recent months Telkom has also seen stake acquisition bids from its former Chief Executive Officer and MTN Group while the smaller service provider Rain, with a strong presence in fixed wireless access, invited Telkom to acquire it late last year.

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