South Africa's Minister of Telecommunications and Postal Services, Siyabonga Cwele, has distanced his department from reports that telecoms company Telkom and state-owned connectivity firm Broadband Infraco (BBI) could merge.

Media reports this year that have pointed to a possible merger between Telkom and BBI.

BBI operates a national long distance fibre optic network, which provides high capacity telecommunication services among major metropolitan centres. The network is also being expanded smaller cities and rural areas, reads the BBI website.

But BBI is struggling financially as it last year revealed to a Parliament committee that it required an urgent cash injection of R243m. It also wanted a further R932m in funding until 2019 on top of R1.8bn that government had previously allocated to the entity.

Cwele, though, has distanced himself from talk of a possible merger as he said that Telkom would release a statement to its shareholders if it was seeking to snap up BBI.

“I didn’t issue any media statement on the alleged BBI and Telkom [merger], so I don’t know where it comes from. But let’s bear in mind that Telkom is a listed company,” Cwele told a Parliament briefing on Tuesday.

“If they [Telkom] do anything, they must follow the processes and they’re following exactly that. As far as I know there’s no statement by Telkom or anything at this stage,” Cwele added.

In the meantime, the department has listed a rationalisation assessment of state-owned entities as its first strategic goal for the 2016/17 period.

Recapitalisation grants

President Jacob Zuma, in his 2016 State of the Nation Address (Sona), said that there would be a critical evaluation of state-owned entities.

Cwele further explained how such a rationalisation could play out.

“What informs rationalisation is the Presidential Commission on the Review of State Owned Enterprises – it’s the NDP (National Development Plan) itself which also calls for rationalisation particularly in this sector,” said Cwele.

“The reality is that as the department, we are responsible stakeholders. We are responsible to drive the rationalisation at the appropriate time, then we will announce what is going to be rationalised,” he added.

BBI has made consistent efforts for government recapitalisation grants since 2012, and Cwele said that his department had appealed on behalf of the entity.

“The challenge with Broadband Infraco is that as members have said there’s no transfer of BBI. National Treasury was very clear: We wrote several letters trying to support BBI funding which, because of the economic climate, they were all rejected.”

The Medium Term Strategic Framework argues for rationalisation of state entities, but Cwele told committee members that the timing of announcements would be managed.

“At the right stage we will come back to the members to say what will be rationalised to what. At this I don’t think we are in that position.

“We have to follow the processes, we have to be careful because we are the shareholders in all these entities and some of them are commercial entities, let alone some of them may be listed,” he added.