Telecoms tentacles tighten

FEW ANTICIPATE South Africa’s new political regime will herald any significant changes in telecommunications policy. In fact, some believe the post-Mbeki regime could adopt an even more interventionist stance. Africa Analysis telecoms analyst Dobek Pater says while the Kgalema Motlanthe/Jacob Zuma regime may have more socialist leanings, telecoms policy is already conservative and the pace of liberalisation slow. So Pater expects to see more of the same.

That view is reinforced by the recent decision by Communications Minister Ivy Matsepe-Casaburri – who surprisingly outlasted the Mbeki-era but isn’t expected to form part of the post-election Cabinet – to appeal the High Court ruling that found in favour of Altech, giving value-added network service providers (Vans) the right to self-provide.

That positive ruling had instilled a new optimism among sector participants, as it upped the pace of liberalisation overnight but which MatsepeCasaburri quickly culled.

Pater says the appeal was indicative Government was trying to play a greater role than diluting its powers and passing these on to regulator Icasa and the market. Few analysts were surprised by her decision but most were disappointed and are rooting for the appeal to fail.

Kaplan Equity Analysts’ MD Irnest Kaplan says whether Vans can or can’t self-provide isn’t a major issue. More important is the spirit with regard to the whole liberalisation process: the appeal represents a backlash against faster liberalisation. Kaplan is concerned about the message the continued uncertainty sends to foreign investors.

Gartner principal analyst Will Hahn says although he hadn’t expected the ruling would lead to hundreds of new operators, it was more about dangling a carrot. “If players can build their own networks it’s a way to bring the operators to the table to negotiate.”

Hahn says there was a “great deal of disappointment” at the minister’s decision. He says SA’s telecoms sector is over-regulated and, in addition, there’s a long, drawn-out litigation process. Telecoms is an enabler of economic growth, so whatever the Communications Ministry can do to “clear the fog” currently hanging over the market would be good for the players, investors and consumers.

But more importantly for Hahn than any change in government or ministers is the fact that African telecoms regimes have agreed to an open access model for the various submarine optic fibre cable projects. That, plus the fact SA has undertaken to host the 2010 Soccer World Cup – a “can’t fail” project – points to positive changes ahead.

BMI-Tech MD Denis Smit expects to see increased Government participation in the telecoms sector – probably through provincial and municipal broadband networks. But as long as such projects go ahead with private sector participation, there’s no reason they can’t succeed, he says.

Although the Communications Minister kept her job, another key ministry in the tele-coms sector, the Department of Public Enterprises, saw Infraco pioneer Alec Erwin stepping down and being replaced by Brigitte Mabandla. But few anticipate Government would change its stance on Infraco.

Smit says he believes Infraco is actually a positive intervention, as it should release the bottleneck in getting bandwidth capacity from undersea cables landing in SA – of which there will soon be a number – up to Johannesburg.

While Government’s stance on some telco assets is understood, its relationship with Telkom is murkier – mired in the conflict of interest of profit maximisation versus bringing down prices.

Word has it the Mbeki Cabinet signed off on Telkom’s proposed sale of its 50% stake in Vodacom to Vodafone. It’s unclear whether the new regime would question that as selling off its crown jewels to foreigners or whether shareholders would approve the deal.

Although the alternative prospect – a proposal by the Mowana consortium to merge Telkom’s 50% of Vodacom with Nigeria’s Globacom – could build a pan-African giant, the jury’s out on its success. Renaissance Specialist Fund Managers’ Khulekani Dlamini says capital is a difficult hurdle.

“Where would they (Mowana) source the capital?” Dlamini doesn’t see any major telecoms policy changes coming from the new Government. He believes new participants will jockey for positions of benefit, in the same way former participants such as Andile Ngcaba did. And that could lead to delays in implementation.

Telecoms discussion

Finweek