Govt`s telecoms two-step

Johannesburg, 07 Aug 2006

Reports that the second national operator (SNO) will not be buying its own network, but rather leasing it from a state-owned entity have raised doubts about government`s integrity in opening up the fixed-line sector.

Business Day today quoted an anonymous source as saying public enterprises minister Alec Erwin`s department had decided Eskom would no longer sell its network to the SNO. Rather, the network would be housed in a government infrastructure company called Infraco. The paper suggested the SNO would lease the network at cost plus 4%.

ITWeb was unable to confirm the reports, as Eskom declined to comment and neither the SNO nor the Department of Public Enterprises, which Eskom falls under, responded before publication. SNO MD Ajay Pandey has repeatedly said the company is "now in advanced stages of readiness to deliver". The SNO said it would provide comment later in the day.

However, an analyst - who spoke on condition of anonymity - said such a move would set back liberalisation in the sector. "The potential for conflict is massive."

While he did not see such a move going ahead, he had no doubt it was under discussion at high level. "Where there is smoke, there`s fire, but I would be surprised if it goes ahead."

The analyst also questioned why government would retain a portion of the network, and not the entire network.

In July, Transtel - a division of Transnet - agreed to sell the SNO its telecommunications assets, which comprise a substantial base of deployed optical fibre cable, as well as telecommunications equipment and facilities countrywide, for R256 million. This network is due to be handed over to the SNO today in Johannesburg.

In the same month, Eskom indicated it would divest its R748 million telecommunications network. The full-service network, owned in conjunction with Transtel, would save the SNO around R2 billion, according to media reports.

Another analyst, who also asked not to be named, said a decision to rather lease the network could indicate cash constraints within the operator. He said depending on the type of lease, the operator would effectively be in control of the network.

If the company had a lease-to-buy option, or a 99-year lease, the analyst was of the opinion that there would be no conflict of interest. "The reasons could be sound; it might strengthen its position as it would have cash and not assets."

Information on the SNO`s Web site indicates Eskom`s telecommunication assets and related resources, which are held in a separate business unit, provide high-speed data transmission, coverage-based operational voice and data, as well as voice transmission and related voice services. It adds there is a significant microwave radio backbone network and extensive UHF and VHF radio networks.