No third operator, says Nexus

By Damaria Senne, ITWeb senior journalist

Johannesburg, 16 Aug 2006

Government is not intending to set up a third national operator by holding onto Eskom`s telecoms infrastructure, says second national operator (SNO) shareholder Nexus Connexion.

It further contends that a special purpose vehicle, which could be set up to house Eskom`s assets, would not be a competitor to the SNO.

The Department of Public Enterprises (DPE) decided not to sell Eskom`s R748 million inter-city network that was initially earmarked for sale to the SNO, allowing it to intervene in lowering the price of telephony in SA, says Nexus chairman Kennedy Memani.

Nexus has a 19% shareholding in the SNO. Memani maintains that public enterprises minister Alec Erwin publicly signalled his department`s intention in his budget vote speech earlier this year.

"The media only caught onto the issue now and sensationalised it, making it into a political matter," he says. "Now it seems the DPE was reneging on its promise to sell the assets to the SNO," he says.

Memani says government approached the SNO well in advance regarding the change in plan.

"At first we didn`t like it [government`s proposal], but the department explained what it wishes to achieve: the lowering of the high costs of telephony for ordinary South African citizens," he says.

Strategy conflict

Memani acknowledges there is some form of conflict in the strategies adopted by the DPE and those of the Department of Communications. Communications has adopted a policy of introducing competition in the telecoms market as a way of lowering telecoms prices, while the DPE is looking at more direct intervention by purchasing the assets and leasing them to the SNO, he says.

Memani also acknowledges the DPE strategy conflicts with government`s stated policy for government not to own the infrastructure, but merely to facilitate it. It also conflicts with the African National Congress`s policy with regard to government`s ownership of infrastructural assets, he notes.

Memeni says the potential role of Nexus Connexion in a special purpose vehicle that would hold the infrastructure has not been defined. There has been no discussion on the matter, he says.

"Right now our top priority is to launch the SNO`s services and build its brand," he says.

BMI-TechKnowledge analyst Richard Hurst says there are obvious disadvantages to the SNO not owning the telecoms infrastructure. For example, the SNO cannot leverage the network as an asset. However, this can also be to its advantage, because, if a better solution comes along, the SNO can migrate to it quite easily, he explains.