The whole InfraCo scandal is driven by a clash of political ideologies at the highest level within the ANC, and self-serving attitudes amongst a few consultants to the Department of Public Enterprises with questionable backgrounds. To date, the Minister of Communications has more or less toed the line with the mainstream policy of telecoms liberalisation that was the original goal of the Mbeki government, in line with a mildly socialist, but broadly non-interventionist view of the economy. The only obvious anomaly in this plan has been Sentech, which breaks the rule of government being a direct player. All other government holdings (Telkom, Neotel, even MTN) have been reduced to non-controlling stakes (on paper, at least). Although there has been concern raised over the government stake in many operators, this has been balanced by private holdings, at least to some extent.
As the current government moved towards a more interventionist, actively socialist approach, Alec Erwin took the chance to show his true colour (red, that is), and proposed the concept of InfraCo, which effectively involved retaining assets built for Neotel by Eskom and Transnet (off their own balance sheets, NOT directly from taxpayers' money), and created a new Public Enterprise. He further seeks to fund this Public Enterprise, at least in part, directly from taxpayers' money (i.e. your and my money). This goes far beyond any interventions to date, and has the potential to cause a collapse of the liberalised telecoms model that is being created, since government could actually force private players out of business using state resources. Far from improving the market, it simply damages it.
That's the bad news. The good news is that InfraCo alone is likely not be very effective at all at reducing prices (as state-owned telcos are far too conservative to compete aggressively), and hence is unlikely to be a real threat to the other players in the market. The only real hope is that Neotel remains an exclusive conduit for InfraCo to the market, and with the backing of strongly competitive shareholders like VSNL, it will be much more likely to influence pricing. If real competition does take hold (i.e. the various incumbents actually react, and prices start to move downward, rather than upward, as they always have in SA), then the market will take off. InfraCo on its own would likely be left behind, unable to react, as has been typical of state-owned telecoms enterprises globally.
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IMO the 4year exclusivity deal would go some way in helping Neotel compete more effectively with Telkom but Neotel owning the infrastructure would be a much better option. I did catch a bit of this fiasco on the news during the week and couldn't help but laugh at Paris "Halt All" Mashile's attempt at asserting ICASA's incompetent authority over the said licencing issue.