SNO bids under fire

Johannesburg, 03 Dec 2002

With crucial public hearings due in mid-December, the two bidders looking to control SA`s second landline telephone operator are finding themselves hard pressed to defend their bids.

The Independent Communications Authority of SA (ICASA) this week released responses from Goldleaf Trading and Optis Telecommunication after both came in for harsh criticism during public comment on their bids.

The consortiums are bidding to be the final piece in the puzzle that is the second national operator (SNO) due to compete with Telkom from next year. The winner is to take up 51% of the SNO and combine with parastatals Esi-Tel and Transtel (30%) and black empowerment group Nexus Connexion (19%) to form the final company.

However, there is increasing pressure on ICASA to select no winner at all. The parastatals, subsidiaries of Eskom and Transnet, have suggested that neither meet the basic criteria government set for the majority owner and should be disqualified.

That view has been backed by Media and Broadcasting Consultants (MBC), a group that supplied ICASA with an extensive analysis showing in detail how each bid failed to meet the requirements of the official invitation to apply for the stake.

MBC, although saying it is acting on no specific brief in analysing the bids, counts among its clients a number "who will be affected by the success or otherwise of the SNO process", it says in its submission. Former Sentech MD and ICASA councillor Neels Smuts is a member of the group.

Esi-Tel, Transtel and Nexus have suggested that they be issued with a telecommunications licence without the inclusion of a 51% partner. Goldleaf and others, however, have warned that there is no legal way of doing so and the result could be years of delay while Telkom continues to strengthen its hold on the market.

On the defensive

The suggestion that neither Goldleaf nor Optis are qualified to steer the SNO has seen them fighting a rear-guard action rather than competing with one another.

Optis has sought to rescue its original bid, plagued by incoherence and errors, by emphasising the involvement of Shanghai Telecom in its consortium. The subsidiary of China Telecom owns only 6% of Optis but is being presented as its public face with a high-level technical delegation currently in SA.

Shanghai Telecom was not involved in the preparation of the Optis bid and did not conduct due diligence of the existing Esi-Tel and Transtel networks, but has now promised to throw its weight behind Optis. The rest of its deficiencies, the group says, will be remedied before public hearings due to start on 12 December.

The Goldleaf Group, on the other hand, has found itself fending off the attacks of Esi-Tel and Transtel. The parastatals have expressed concern at Goldleaf`s intention to incorporate only certain parts of the fairly extensive backbone networks they built in preparation for their inclusion in the SNO.

Goldleaf believes parts of the fibre optic networks, valued by the parastatals at between R3 billion and R5 billion, would have no real value to the SNO. The two state companies fear that could leave them with assets they have no use for should the Goldleaf bid win.

The responses of both bidders have left much to be questioned during the two days of public hearings. Goldleaf will continue to be pressed on the fact that its group does not include an overseas telecommunications operator as initially required, while Optis has yet to submit a business plan other than the flawed original described as woefully inadequate.