Goldleaf, Optis in last-ditch SNO efforts

Johannesburg, 28 Jan 2003

Goldleaf Trading and Optis Telecommunications have each made a final stab at convincing regulators they are the right consortium to lead SA`s second fixed-line telephone company. However, continuing resistance from their potential partners has hampered their efforts as it continues to seem unlikely that either will make the cut.

On Friday, the consortiums submitted the final documents they will be allowed to bring to the attention of the Independent Communications Authority of SA (ICASA) before it makes a decision this week.

The regulator is to recommend a winning bidder to communications minister Ivy Matsepe-Casaburri but is believed to be preparing a recommendation that finds neither bidder qualified to control 51% of the second national operator (SNO).

The bidders, commenting on a recently released analysis of their strengths and weaknesses, both attacked the findings by consultant Next Generation Consortium, which advised ICASA.

Goldleaf claimed "factual inaccuracies and incorrect assumptions" in the report, while Optis said it believed the report "has several prejudicial flaws".

The report found both to be in contravention of some formal requirements of the bidding process. If accepted by ICASA, this would mean disqualification of both.

Optis, which has been largely disregarded as a serious contender from early in the process, submitted a comment of only three pages that it said would serve to illustrate the flaws in the report. The allegation that parts of its bid document were plagiarised and that much of the rest is the property of Siemens continues to haunt the group.

Optis, however, says it had Siemens` consent to use the information in question and that its chances were compromised because Next Generation disregarded portions of its bid.

Optis also answered criticism that the Friedland family, which owns 73% of the consortium, would not invest its own funds into the SNO.

"The Friedland family are investors who look for certain returns on their investment. I will not jeopardise Optis or the SNO to satisfy my own requirements. This is in the best interests of Optis and the SNO."

Goldleaf`s positive spin

In contrast to Optis, Goldleaf`s response is nearly the size of the analysis it is responding to as it seeks to refute Next Generation`s findings.

The consortium has put a positive spin on the report, highlighting Next Generation`s comments on its technical and business abilities, despite the fact that the analysis also finds its bid fatally flawed.

Goldleaf also sought to put out some fires, saying Next Generation had misunderstood the relationship between itself, British Telecom and MTN. It says the analyst`s suggestion that MTN had manipulated the Goldleaf business plan in order to protect its own market position is "absolutely untrue", an assertion echoed by MTN in its own submission.

However, Goldleaf`s biggest problem remains a difference in interpretation of a key bid requirement. Next Generation, as well as several other parties, believes any bidding consortium must include a company that has more than 500 000 telephone lines under its control under the rules of the selection process. Goldleaf believes the requirement is for experienced individuals, of which it says it has more than enough. If ICASA accepts the Next Generation interpretation, it will have no choice but to declare the bid invalid.

Opposition within

Goldleaf and Optis did not find any respite from the continued opposition to their bids from the partners that will make up the remaining 49% of the SNO. The three, Eskom-owned Esi-Tel, Transnet`s Transtel and empowerment group Nexus Connexion, have all disparaged both bids.

Eskom reinforced its previous comments on the shortcomings of the two suitors with its own submission to ICASA. It said it concurred with the Next Generation findings, which substantiated its own analysis, and that either bidder would only contribute to "significant destruction in the value of [Eskom Enterprises`] and Transnet`s assets".

Nexus also told the regulator that neither Goldleaf nor Optis was an ideal partner, but its comments did hold a slight glimmer of hope for the former.

"We do, however, acknowledge that there might [be] some strengths that the two bids have, particularly the Goldleaf bid," the group said.