SNO Wars: May the farce be with you

I am no longer a glass half empty type of pessimist when it comes to the ongoing soap opera that is the second national operator (SNO); I am more of a glass completely empty type of guy.

May 2002 was when the SNO was supposed to be up and running and giving the big bad wolf that is Telkom a run for its money. Instead, more than 24 months later, nothing has changed.

Worse still is the news that now Nexus Connexion, the 19% empowerment shareholder in the SNO, is seeking a judicial review of the process that saw CommuniTel and Two Consortium each awarded a 13% share of the strategic equity of 51%, with the remaining 25% being warehoused.

This means that in all likelihood we will not see an SNO until at least this time next year.

Kennedy Memani, chairman of Nexus, is also seeking an application for interim relief while the full judicial review into the process is conducted, and if this is granted it will probably mean that the already sluggish wheels of justice turn even more slowly.

Going by the rules laid out in the invitation to apply, the minister may well have exceeded her mandate in breaking the 51% shareholding into two 13% portions and the warehoused 25%, but should Memani succeed in getting the judicial review, it could mean the whole process has to go to a third round of bidding, which will only delay the introduction of an SNO by many more months.

The real problem I have with this issue is that I want to know why Memani has chosen to take issue with the process now, rather than when it was first announced by the minister six months ago.

There are several reasons he could conceivably have chosen to make this stand now, although none of them are good - either for the SNO as an entity or the country a whole.

In all likelihood we will not see an SNO until at least this time next year.

Rodney Weidemann, telecoms editor, ITWeb

Although the official line from the SNO spokesman has been that they are all working together for the good of the entity, the fact of the matter is that there has been a bitter struggle for control of the SNO, with the various players trying to jockey for as much power as possible.

Memani - bizarrely enough - claims Nexus should be running the SNO, since the two 13% shareholders do not have the experience to do so, despite the fact that both consortiums have people on board who have been involved in numerous other SNO roll-outs around the world.

So it may simply be that he has lost his battle for control and is resorting to the courts in order to exert pressure on the other members of the SNO.

Of course, it is also conceivable that there are more sinister motives. After all, who gains the most by the SNO being delayed?

It certainly isn`t the public, who find themselves with a lack of choice, or the 13% shareholders, who have both sunk a lot of money into the project already, without seeing any returns yet. Neither is it the state-owned enterprises, which have over a billion rand worth of network going unused and devaluing all the time.

There is one monopoly that does benefit from the delays, by gaining more time to tie customers into long-term contracts and suchlike, although I am not suggesting it has anything at all to do with the delays. I am simply mentioning the various possibilities that exist.

While we are on the subject of possibilities, a source inside the SNO process tells me that Nexus has not met with its licensing conditions, meaning it could be called to account by the minister - if she has the guts - and have its 19% shareholding in the SNO withdrawn.

Should this happen, the company would lose its legal standing to participate in the SNO process and its application for a judicial review would be null and void.

Of course this would still leave the SNO without a portion of its shareholding, but perhaps while another process is under way to find a new empowerment partner, the rest of the shareholders could get on with building a rival to Telkom, rather than trying to constantly stab each other in the back.

The way I see it is that Two Consortium and CommuniTel are the only players within the SNO that did not get what they were bidding for, since they were both after the 51% strategic equity stake.

Despite this, they are the ones who appear most eager to drive the SNO forward and seem to be the ones that bring the most experience and equity to the table.

So the only question that remains then is what will happen to the SNO should one or both of them decide to cut their losses and get out before they end up losing even more money?