State-owned Broadband Infraco on Thursday promised to deliver profitability after two more financial years, after reporting a reversal, during the 2013 financial year, of the gains achieved in the prior year.

Infraco, which showed signs of a turnaround, narrowing losses from R206-million in 2011 to a R95-million in 2012, widened its losses to R181-million during the year ended March 2013.

The company reported revenue of R237-million in the 12 months, a 40% fall from the R394-million achieved during the year to March 2012.

CFO Ramasela Magoele attributed the lower revenue to “shrinking volumes of business from Neotel” as the rights of use of Infraco’s anchor client ended, but she commented that Infraco’s “divestment” from Neotel had opened doors, despite its immediate financial impact.

Public Enterprises Deputy Minister Bulelani Magwanishe said Infraco should examine the possibilities of infrastructure refurbishment and expansion to meet the needs of the operators and Internet service providers wanting to use its network.

But Infraco CEO Puleng Kwele indicated that about a R1.1-billion recapitalisation over the next three years was required to expand its services to new clients – and this was just a fraction of what was required to roll out government’s 2020 broadband ambitions.

“The company will pursue various funding models. Funding will also be sourced commercially, as well as [through] private–public partnerships, including cobuild projects,” she noted.

Kwele appealed to its shareholder, the Department of Public Enterprises (DPE), for increased funding, but director-general Tshediso Matona said the company needed to fend for itself as a commercial State-owned company (SOC).

“Such funding must be justified by demand and demonstrable revenues earned by such upgraded and expanded infrastructure. We urge the management and board of Infraco to be aggressive and innovative in addressing the future of this asset,” added Magwanishe.

However, the DPE would continue supporting the firm, unlocking access to potential funds from the National Treasury, where the recapitalisation would be considered against an “aggressive, innovative and bankable business case”, and introducing the company to other spheres of government.

There should be further engagement with other parastatals and departments, including the Department of Communications, in addition to offering competitive services to SOCs.

Kwele said that Infraco was currently engaging other SOCs for the potential provision of competitive backhaul services across Infraco’s 12 800 km fibre network.

Meanwhile, the company generated cash flow of R10.2-million, a decline from the R52-million reported last year, when Infraco achieved a cash positive balance for the first time.

Cash on hand at the end of the year was R343-million.

Infraco commented that the Department of Science and Technology acquired 70% of Infraco’s existing capacity on the West African Cable System for the Square Kilometer Array project.

The deal was valued at about R600-million, half of which would be delivered in the current financial year.