No SNO this Christmas?

Johannesburg, 13 Aug 2002

Large foreign operators were to submit their bids for control of SA`s second national operator (SNO) by the end of this month. However, government has reportedly extended the deadline by at least two months, making it less likely that the new operator will be licensed this year and be operational early in 2003.

A government spokesman yesterday told Reuters that applicants for the 51% of the SNO set aside for an experienced, and probably foreign, operator would have until the end of October to submit bids.

Department of Communications officials could not be reached to confirm whether the extension was official and the Independent Communications Authority of SA (ICASA), which will handle adjudication of the bids, referred all inquiries back to the department.

The delay, if made official, will come as little surprise to the industry. Rumours abound that there has been little or no interest from foreign players in pursuing a controlling stake of the new operator and several analysts have expressed doubt that telecoms companies have either the ready cash or the appetite to set up shop in SA.

Last week, Gartner analyst Bhawani Shankar said factors like the dependency of ICASA on the government and the way the SNO licence was being handled would see investors shy away. He recommended that a consortium made up of foreign banks, local investors and more than one foreign operator take on the 51%, decreasing the exposure of each to acceptable levels.

The delay will also come as welcome news to Telkom. CEO Sizwe Nxasana recently said there was not enough room for both the planned listing of Telkom in the first two months of next year and the introduction of a capital-hungry SNO at the same time.

"The same pool of investors is expected to invest in the [Telkom] IPO and invest in making the SNO a success," he said.

Nxasana argues that Telkom is ready to be listed, while the SNO is unlikely to be operational in the first quarter of 2003 in any event, so the latter should be delayed.

A two-month delay would not in itself allow Telkom to be listed before the SNO starts up, but there may well be further delays in the adjudication. If several bids are submitted at the end of October, it could take well over a month to evaluate them, leaving the winner unknown when the regulator shuts down over the holiday season.

That still leaves various licences to be issued by government, again unlikely to happen within a month as the main SNO licence is yet to be finalised.

Once selected, the foreign operator is still faced with the task of integrating with parastatals Transtel and Eskom`s Esi-Tel, which are to hold a combined 30% of the entity, as well as the black economic empowerment partner. The Nexus Connexion consortium was recently selected by ICASA as its preferred bidder for the 19% empowerment holding, but that decision is yet to be ratified by communications minister Ivy Matsepe-Casaburri.