South Africa - Potential merger of Infraco and Sentech has raised concerns about the lack of synergies

[techcentral] The departments of public enterprises and communications are reportedly in discussions to explore the synergies between Broadband Infraco and Sentech, a move that has analysts concerned.

Moneyweb reported on Friday that public enterprises minister Malusi Gigaba and communications minister Roy Padayachie were in discussions to explore a tie-up between the two companies.

Infraco, which only launched commercial services late last year, is a state-owned wholesale telecommunications operator; Sentech, also owned by government, specialises in signal distribution for broadcasting.

The talks between the ministers has sparked speculation that a tie-up could result in government entering the retail broadband market, a possibility that would not be welcomed by commercial operators.

Infraco has already been denied the chance to provide retail broadband services to consumers. The company was granted a network licence only, not the service licence it would need to provide retail products.

Sentech has also dabbled in the retail broadband space, although its efforts in this area failed completely. It invested hundreds of millions of rand in a broadband product called MyWireless, which was later scrapped.

Both Infraco and Sentech have recently come under the spotlight for alleged financial mismanagement and tender troubles.

Arthur Goldstuck, MD of World Wide Worx, says a tie-up between the two companies would probably multiply their problems rather than resolving them. “It looks worryingly like combining two ineffectual entities in broadband delivery,” he says.
Another analyst, who asked to remain unnamed to protect a relationship with both Sentech and Infraco says the plan is not entirely without merit, but the two companies would have to make dramatic changes for it to work.

Possible Sentech, Infraco deal has analysts worried