Cell C is preferred cell licence bidder

Johannesburg, 29 Feb 2000

The South African Telecommunications Regulatory Authority (SATRA) has announced that it intends to recommend the Cell C consortium to the minister of communications as the preferred third cellular licensee.

However, Cell C doesn't quite have the licence in its pocket yet. The spurned bidders have until 14 March to lodge "representations" with SATRA, which will probably take the form of objections. Communications minister Ivy Matsepe-Casaburri must then accept the recommendation before the licence can be issued.

Although speculation has long pegged Cell C as the frontrunner, directors of the consortium expressed their glee at the official announcement. "The entire team is absolutely delighted," said spokesman Zwelakhe Mankazana shortly after the announcement. "This is the outcome of a lot of hard work."

The SATRA council says it is satisfied that the ongoing controversy that surrounded the selection process has not impacted the outcome. "Believe us. This decision is as it should be," said deputy chairman Eddie Funde.

Chairman Nape Maepa recused himself from the selection process earlier in February because of past involvement with a trustee of a trust with a stake in AfricaSpeaks, one of the bidders. Maepa said at the time that the connection did not constitute a conflict of interest, but that recusal would prevent a perception of bias.

Cell C is 60% owned by Saudi Oger and 40% by Cellsaf, an empowerment consortium of 33 black groups. Although leaked documents have raised concerns that Saudi Oger may see the licence as a short-term investment, SATRA says the company has "sufficient financial depth to fund operations". Mankazana says Cell-C may be listed within two years, but that the move will include a "lock-in period", preventing the owners from using the listing as an exit strategy. "They are in it for the long run," he says.

Asked what differentiated the Cell-C bid from others, Mankazana said the company had a different approach to empowerment, which is a central factor in the licence issue. "For empowerment to succeed you need secure funding and a balanced business plan."

In a breakdown of criteria by SATRA, the proposed business plan and investment strategy was weighted at 44% and empowerment at 25%. The technical plan accounted for 13% of the decision, the universal service factor counted for 11% and the impact on the telecoms industry and consumers accounted for the remaining 7%.

The SATRA council says recommending Cell C was a unanimous decision.

The remaining five bidders have two weeks to lodge representations with SATRA, and all are expected to do so. Cell C says the controversy and sometimes below the belt manoeuvring among bidders was unexpected but the motive comprehendible. "Some of our competitors knew our bid [was superior], so we understand some of their behaviour."

Cell C expects to spend at least $600 million, or R3.6 billion, on its start-up over the next three years. Its projected equipment contract is worth $300 million. A preferred bidder has not been identified, but companies like Ericsson, Nokia, Siemens and Motorola are expected to bid on the contract. American GTE will be the operational partner.