South Africa in Talks With Telkom on Broadband Partnership

South Africa’s government is in talks with fixed-line operator Telkom SA SOC Ltd. (TKG) about taking part in a partnership to boost broadband usage in the country, according to Communications Minister Yunus Carrim.

“We are negotiating with Telkom because obviously they have 147,000 kilometers (91,400 miles) of the fiber optic,” Carrim said in a Jan. 25 interview at the World Economic Forum in Davos, Switzerland. “We need to ensure that we get the most cooperative relationship we can between state-owned companies, the government, publicly-listed companies like Telkom and the private sector.”

The government will set up a broadband council within the next 10 days to help develop the proposed partnership between public and private sector entities, which will help avoid the duplication of infrastructure, Carrim said. Average Internet speeds in South Africa lag smaller economies including Martinique and Libya, according to data compiled by netindex.com.

“We recognize that the private sector will only invest in areas where they get sufficient rate of returns,” Carrim said. The state has to take “greater responsibility for under-serviced and rural areas.”

A Telkom spokesman declined to comment. The company’s shares were little changed at 31.50 rand at the close of trading in in Johannesburg.

No Intervention

The government, which owns about 40 percent of Telkom, won’t intervene with the company’s plan to reduce its headcount, Carrim said. The Pretoria-based company may cut its approximately 21,000-strong workforce by 30 percent over five years, Chief Executive Officer Sipho Maseko said in an interview last month.

“That’s being negotiated with the trade union,” Carrim said. “It’s not a state-owned company. We can’t intrude or intervene in the way we could with a state-owned company but our understanding is that they are being prudent about managing this process.”

Telkom, which has had five leaders since 2007, is struggling to revive revenue in a country that has leapfrogged fixed-line technology in favor of smartphone devices that are driving a boom in data usage across Africa.

To contact the reporters on this story: Christopher Spillane in Johannesburg at cspillane3@bloomberg.net; Lyubov Pronina in London at lpronina@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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