ICASA digs into SNO bids

Johannesburg, 13 Dec 2002

Yesterday`s public hearings on the bidders for a majority stake in the second national operator (SNO) saw Goldleaf Trading defending its lack of a telephone shareholder operating at least 500 000 customer lines.

The SNO is due to start competing with Telkom next year. The hearings continue today.

The Goldleaf bid document, the basis for the hearings and the selection process, is generally considered superior to that of Optis, which is riddled by flaws and inaccuracies not likely to go unnoticed by the questioners.

The public hearings, which conclude tomorrow, are the last remaining opportunity for interested parties and members of the public to question the groups that hope to hold 51% of the SNO.

Both hopefuls are being questioned by Transnet and Eskom, whose Transtel and Esi-Tel subsidiaries are to hold a combined 30% of the SNO, as well as by independent group Media and Broadcasting Consultants, and attorneys representing the family of Liberty Group`s Hilton Appelbaum.

However, Goldleaf`s toughest challenge came from ICASA, with councillors grilling the largely British consortium on every part of its bid and business plan.

Open to negotiation

Goldleaf played up its strengths, focusing on the experience of its members, their long involvement in the SNO process and wielding a representative from MTN and a letter of support from British Telecom.

But despite the backing of the two major operators, the consortium found itself nearly constantly defending its lack of a telephone shareholder operating at least 500 000 customer lines, as required by government`s rules for the selection process. Goldleaf believes the requirement is not critical, yet it is the main procedural point on which it is criticised.

Another point of obvious concern to ICASA is the group`s ability to raise the billions in cash that a capital-hungry SNO will require. After protracted questioning, Goldleaf agreed to address ICASA`s concerns in writing within two weeks. However, the consortium said it had received initial funding commitments from the likes of Barclay`s Bank and local banks Absa, RMB and SCMB.

"We are confident that we will raise any amount we need to raise," said chairman Joseph Okpaku.

Money is also the central concern of Esi-Tel and Transtel, which fear for the value of the infrastructure they created in preparation for the SNO. Although their shareholding is set at 30%, the equity the other parties bring for their shares has not been prescribed, leaving the parastatals worried about dilution and that their parent companies will not get "fair value" for the assets.

Goldleaf has said it doubts the usefulness of as much as 30% of the network the parastatal built at a cost of billions of rands. However, Goldleaf says this position is open to change, as is the basis of its business plan and other matters, through negotiation with the other groups that will form the SNO.

More fireworks from Optis?

Despite sometimes harsh questioning, the examination of Goldleaf revealed little new information. The biggest stir of the day was created by the sudden withdrawal of a lawyer from Edward Nathan & Friedland, who represented Optis for scant minutes before Goldleaf pointed out that the same firm had previously also advised it.

More substantive issues are expected to come under the spotlight when the reticent Optis is examined today. Despite a previous written question and answer period, relatively little is known about the consortium which features Shanghai Telecom as a shareholder.

The focus of attention will probably be Warren Friedland, the 18-year-old who is the largest shareholder in Optis at 30%. His 21-year-old sister Monique holds 18% and father Alan 25%. The family is likely to be hard pressed to defend a bid riddled with flaws such as the apparent confusion of SA with Mozambique.

ICASA is expected to make a decision on the bids early next year.