[By Duncan McLeod]
State-owned Sentech is reviving plans to build a national broadband network. It wants a second chance and is promising to do things differently this time. However, as much as Sentech’s heart is in the right place, government must not allow it.
The newly appointed chairman of Sentech, Quraysh Patel, is a breath of fresh air in a stale state-owned enterprise. The energetic businessman, installed by communications minister Siphiwe Nyanda to help turn around the troubled company, isn’t afraid to call a spade a spade.
In a lengthy interview last week, Patel told me in detail about the problems afflicting the company, the stupid decisions it’s made in recent years, and what needs to be done to rescue it.
The picture Patel painted was one of a company adrift. He told me he’d uncovered evidence of gross incompetence by the former management team and even pointed to alleged graft committed by former top managers. He told me how the new board was trying to clean up the mess by getting its clients to pay on time and tightening up financial controls, among other things.
A new CEO should be appointed by the end of the month and Patel has promised that Sentech will get out of businesses that don’t make financial sense.
Patel tells a convincing story. He comes across as exactly the sort of chairman Sentech needs to pull itself back from the brink. The jury’s still out, but I’d put money on Patel getting the job done.
But I have a concern. And it’s one that should have taxpayers worried, too. Under Patel’s chairmanship, Sentech is reviving plans to build a national broadband wireless network.
Many Internet users will remember the company’s abortive previous attempt to build such a network, and will shudder at the prospect of its trying again.
The late Ivy Matsepe-Casaburri, as communications minister, had given Sentech two valuable licences in a poorly planned attempt to establish it as a rival to Telkom. But Sentech chose the wrong technology, was hopelessly ill-prepared to deal with retail consumers, and, frankly, didn’t have the management talent needed to pull it off. It was a failure that cost taxpayers more than R500m.
Patel says Sentech won’t repeat the same mistakes. Instead of trying to offer services directly to consumers, it will build a wireless access network and sell services on it to metropolitan and town councils, government departments and provincial governments.
Sentech wants to spend R2bn on the new network but has promised not to go to cap in hand to central government for funding — apart from the R500m (plus R80m in interest) it has already received from national treasury. Patel wants town councils and provincial governments to help fund the rest.
When Sentech received its lucrative telecom licences, it had all the opportunities in the world. Back then — in the early 2000s — Telkom still dominated the landscape, and the mobile operators were only beginning to think about building third-generation networks.
The market has changed dramatically since then. A full-scale war is brewing between Telkom, Vodacom, MTN and Cell C. It’s going to get ugly.
Patel says Sentech will build a wholesale network only, but a state-owned enterprise that is ill-equipped to cope in a wildly competitive environment will struggle. The company could end up being trampled. Again.
With the big, private operators viewing rural broadband as an area of growth, Sentech’s goal of extending connectivity to remote places could soon happen anyway.
Sentech failed once in much easier market conditions. Giving it another chance in a cutthroat environment would be a mistake.
- Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail
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