Tata eyes telecoms stake

By Damaria Senne, ITWeb senior journalist

Johannesburg, 23 Aug 2006

The Department of Public Enterprises (DPE) has hinted that negotiations are taking place regarding the sale of a stake in InfraCo to Indian diversified group Tata.

Government set up InfraCo to house the telecommunications infrastructure installed on the country`s power lines that was initially intended to be transferred from Eskom to the second national operator (SNO).

It has been reported that InfraCo will require an investment of $350 million to launch its operations, and it is understood that Tata could invest $60 million through its international call provider Videsh Sanchar Nigam.

Gaynor Kast, DPE spokesman, would neither deny nor confirm reports that Tata is eyeing a 26% stake in the South African telecoms company. InfraCo will offer long-distance telecoms services and operate marine telecoms infrastructure.

This will be the second telecoms investment in SA by the Indian multinational, led by chairman Ratan Tata, which previously took a 26% stake in the SNO.

Kast refused to be drawn on details of the discussions, saying it would be premature to discuss the issue. She explained that other government departments, such as National Treasury and the Department of Communications, still have to be consulted, and the matter must be brought to Cabinet.

"We are still considering the future location and development of the assets and, until such a decision is taken, there will be no further comment regarding who the development partner(s) will be," Kast stated.

The South African government previously announced its decision to invest $225 million in InfraCo, with the remainder to be funded through debt.

While InfraCo`s shareholding is subject to speculation, a search at the Companies and Intellectual Property Registration Office indicates InfraCo Telecommunications Network has been registered, suggesting the company will be established.

Reacting to the news, BMI-TechKnowledge analyst Richard Hurst said public enterprises` decision not to disinvest from telecoms infrastructure is indicative of government`s wish to have its cake and eat it.

"In any other market, you would be taken to the Competition Commission for this," he said.

Hurst said if the DPE had sold the infrastructure to the SNO, it would have made sense for the SNO to lease capacity to smaller telecoms players at cheaper prices, thus driving the objective of increased competition.

At some stage, government will have to show that it is actually liberalising the telecoms market by divesting itself of these assets, he said. Meanwhile, investors are taking a "wait and see" approach, he believes.