<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">By Financial Mail
Don't expect a rival to Telkom soon. The hype surrounding communications minister Ivy Matsepe-Casaburri's announcement that the second network operator (SNO) will be licensed by September 17 is misleading.
The announcement failed to address issues at the core of the fight between some of the SNO's shareholders. The minister has not yet identified who will control the SNO. All she has said is that the controlling interest will go to an unnamed financial investor.
Because of deep distrust between minority shareholders, the announcement may result in further court action and delays. That's the bad news. But there's also a glimmer of hope for the sector.
This week, government is expected to announce a range of other measures to open the sector to more competition. Communications deputy minister Roy Padayachie says: " The SNO alone is not enough, given the way technology is advancing. One of our priorities is to accelerate liberalisation of the market."
Padayachie says areas for potential liberalisation include "voice over Internet, regulations around the interconnect regime and utilisation of Telkom infrastructure".
These changes will create a more vibrant sector, but real competition for Telkom will come only if the SNO invests several billion rand in infrastructure. The prospect of that happening is dim.
"Who has ever heard of a deal this size going to unknown financial investors?" "What does a financial investor know about telecoms?" "How can minority investors agree on the business plan - what if the controlling shareholder does not like it?" These were the concerns expressed by some shareholders in the SNO when they were approached by the FM.
In terms of Matsepe-Casaburri's announcement, the SNO will comprise state-owned Transtel and Esitel (part of Eskom Enterprises), which together hold 30%; broad-based empowerment group Nexus Connexion (19%) and SepCo, a new company with 51% of the SNO's share capital. SepCo comprises CommuniTel and Two Telecom Consortium (24,5% each). Astonishingly, an unnamed financial investor will control SepCo (51%) and, in turn, will also control the SNO (26%).
Matsepe-Casaburri says the licence will be granted subject to the acceptance of the shareholding and control structure of the SNO, and finalisation of the business plan and the shareholder and subscription agreements. "I will continue with the process of selecting a suitable investor for the unallocated equity," she says.
But FM discussions with shareholders suggest these pre conditions will not be met. So, though the latest announcement meets the August deadline imposed by cabinet and the president, industry regulator Icasa has only a slim chance of finalising the licensing process, it seems. "The minister has adopted a Pontius Pilate approach and is washing her hands of this," says one shareholder.
Other shareholders approached by the FM concur. They are angry that they will be blamed for not reaching agreement, when instead the minister is at fault for creating an unwieldy structure.
As the minister now proposes, Two and CommuniTel will no longer control SepCo. "We were awarded 25,5% of SepCo and agreed to a reduction subject to certain conditions, which the minister has accepted by her actions. We did this to get the SNO moving," says CommuniTel CEO Peter Archer.
But such behind-the-scenes deals have deepened the distrust and rivalry between CommuniTel/Two and Nexus, making the likelihood of a joint business plan and shareholder agreement remote.
Though Nexus chairman Kennedy Memani says he welcomes the minister's decision to move forward, he "hopes the conditions precedent in her announcement will be met by the due date".
There's considerable political and commercial pressure to find a resolution. "This business has a time value," says CommuniTel's Mike van den Bergh.
Last week Transnet said it had impaired assets worth R526m related to Transtel's involvement in the SNO. Eskom has impaired assets worth R649m related to its infrastructure investment in anticipation of its participation in the SNO. But Karl Socikwa, chairman of the interim SNO board, is confident conditions laid out can be met and that shareholders will put up a united front for a September 17 licence.
Padayachie also urges shareholders to find common ground. Asked if government might scrap the SNO if shareholders don't reach agreement, he says: "We hope this won't happen."
<hr height="1" noshade id="quote"></blockquote id="quote"></font id="quote">
This is just so typical of govermants way to wash its hands and put the blame on someone else.
[
!]
