Technology group Altech is growing increasingly frustrated at the slow pace of deregulation in SA\u2019s telecommunications industry. At the company\u2019s results presentation last week, CEO Craig Venter compared SA with relatively speedy liberalisation in other African markets.<\/p>\n
Altech has become a serious player in telecoms in East Africa after its R590m acquisition of telecom assets from the Sameer Group. Venter wants the company to be a significant network operator in SA, too \u2014 it is running a pilot broadband wireless network and is in talks to buy Internet service provider Verizon Business. But he is impatient at regulatory delays.<\/p>\n
Last week, Altech\u2019s largest subsidiary, cellular service provider Altech Autopage Cellular, said it would seek an interdict in the high court to prevent new licences being granted. It wants a review of the procedures being used by the Independent Communications Authority of SA to license new network operators in terms of the Electronic Communications Act. Autopage has cited Icasa, its chairman Paris Mashile, communications minister Ivy Matsepe-Casaburri, and 23 companies in the sector as respondents.<\/p>\n
Venter is reluctant to comment on the case, claiming that it is sub judice. Altech is probably worried that it will not be issued with the individual electronic communications network service (I-ECNS) licence it needs to build a full-service network in competition with operators such as Telkom and Neotel.<\/p>\n
Venter says the licensing process needs to adhere to the Electronic Communications Act, the legislation that governs the sector. \u201cThat process shouldn\u2019t be flawed,\u201d he says.<\/p>\n
At least a dozen companies are expected to bid for the valuable infrastructure licences, but Icasa has warned that not all those seeking licences will get them. Icasa will also have to decide who gets access to scarce radio frequency spectrum. Most of the wannabe operators want to use wireless technologies, as these are cheaper to deploy than fixed lines. But there is not sufficient spectrum available for everyone.<\/p>\n
Altech already has a highly cash-generative telecom business in SA in Autopage Cellular. This business recorded a R262m operating profit in the year to February 29 on sales of nearly R5bn, representing 39% of group operating profit and 59% of turnover. Autopage has almost 1m subscribers and sells services on behalf of Vodacom, MTN and Cell C.<\/p>\n
But Venter is keen for Altech to be more than just a service provider to other network operators and wants to build a wireless broadband network.<\/p>\n
So far, Altech is having more success elsewhere on the continent. It plans to supplement its recent acquisition of telecom assets in East Africa by investing in a new submarine cable project called The East Africa Marine System (Teams). Venter won\u2019t say how much Altech will invest in Teams \u2014 the project is being led by Kenya and will see a cable built between Mombasa and Port Sudan in the Red Sea \u2014 but says the Kenyan government has offered Altech a stake in the system.<\/p>\n
The investments will help temper criticism from analysts that Altech is sitting on too much cash. At year-end, after generating another R838m during the year, the company boasted R1,6bn in cash (from R1,1bn previously). But Venter says this excludes the R590m for the Sameer deal, a further R90m in taxes due and payment of a R250m dividend.<\/p>\n
The rest of the business is performing well, except for a R44m loss at smart-card company NamITech SA (an improvement on a year ago). Venter says the problems at NamITech have been addressed. One business that performed particularly well was Altech\u2019s decoder manufacturer, UEC, which recently secured big contracts in India.<\/p>\n
At a p:e of 10,2 and a dividend yield of 5,5, Altech looks remarkably cheap. Venter clearly thinks so: he repeatedly told investment analysts at last week\u2019s results presentation that he thought a recent slump in Altech\u2019s share price \u2014 from R80 in October to R52 now \u2014 was overdone.<\/p>\n