South Africa Seeks Telkom’s Cash to Expand Internet Access

South Africa will push for phone company Telkom SA SOC Ltd. to provide cash for a government-backed expansion of broadband Internet access to most citizens, Telecommunications Minister Siyabonga Cwele said.

“The rollout of broadband is quite a costly exercise,” Cwele said in a phone interview Friday. “Telkom has got its own balance sheet which can meet some of this demand.”

The broadband proposal may cost as much as 98 billion rand ($8.36 billion) to deliver and will be funded by the sale of mobile frequencies and from the government budget as well as resources from Telkom, which is almost 40 percent-owned by the state, Cwele said. The spending is likely to be less as the government saves money by shifting public services online, he said.

South Africa is one of the world’s stragglers in Internet access with just 3.06 fixed-line broadband subscribers per 100 people in 2013 compared with 10.08 in Brazil, 29.25 in the U.S. and 34.56 in Germany, according to figures compiled by the World Bank. The ruling African National Congress has pledged to extend broadband access to every household by the end of this decade, according to its National Infrastructure Plan.

“Telkom welcomes the announcement of the government’s decision to appoint the company as South Africa’s national broadband champion,” and the company will “drive collaboration between government and industry” to set up the network, Jacqui O’Sullivan, a spokeswoman at the phone operator, said in an e-mailed response to questions.

Telkom fell as much as 2.1 percent and was trading down 0.9 percent at 77.01 rand as of 11:39 a.m. in Johannesburg, reversing a gain earlier in the day. The stock has risen 10 percent this year, valuing the company, Africa’s largest fixed-line phone operator, at 40.1 billion rand.

Free cash flow at Telkom in the fiscal first half ended September amounted to 1.7 billion rand while net debt narrowed 74 percent to 545 million rand. Domestic competitor MTN Group Ltd. is exploring the purchase of a majority stake in Pretoria-based Telkom, people familiar with the matter said earlier this week.

Before it's here, it's on the Bloomberg Terminal.