SNO could face more hiccups

Johannesburg, 30 Aug 2004

The licensing process for the second national operator (SNO) may face further hiccups, as it is not yet clear whether Nexus Connexion, the 19% empowerment shareholder, will proceed with its legal action against the communications minister.

Last month, Nexus sought a judicial review into the process whereby the minister awarded 13% stakes in the SNO to Two Consortium and CommuniTel, despite the fact that neither was recommended by the Independent Communications Authority of SA.

The company then decided not to proceed with this issue, having received a letter from the minister which said the SNO would not be licensed in its current form without Nexus being given two weeks` notice, and would still have time to reapply for an interdict to block such a move.

According to the company`s legal team, it still has to be decided what action to take, following the minister`s announcement last week that a licence will be granted on 17 September.

"We are still taking instructions from our client and formulating our position on this matter, and we will make an announcement regarding this later in the week," says Ezra Davids, a member of the Nexus legal team at Bowman Gilfillan Attorneys.

'Don`t hold your breath`

Meanwhile, industry analysts and watchdog groups are not optimistic about the process, despite minister Ivy Matsepe-Casaburri`s announcement last week.

According to Ray Webber, spokesman for the Communication Users Association of SA, the organisation has heard from some sources that the problems with the SNO are far from over.

"Of course we hope it is going to happen as promised, but I still feel it`s a case of don`t hold your breath, as it probably won`t happen anytime soon," says Webber.

"The problem is that even if everything goes smoothly with the licensing process from here, it will still take months for the SNO to bed down its operations, sort out its billing systems and so forth, before it can even begin working as an entity, and in the meantime, Telkom is smiling all the way to the bank."

Andre Wills, an analyst at Africa Analysis, feels the way the minister has altered the shareholding structure - with the introduction of Sepco as a 51% majority shareholder, with Two and CommuniTel each holding a percentage of the shares in this entity - is an interesting way of solving the shareholder disputes which have dogged the SNO.

"I think this is a very clever solution to the shareholder dispute, although we will still have to wait and see what happens regarding the legal challenge from Nexus," says Wills.

"The real interesting part about Sepco is the question of who will be the 51% shareholder within that entity - will it be a financial institution, an international telco operator or someone else entirely?"

He feels the problem with trying to get a major organisation as the 51% shareholder in Sepco is that there are more lucrative markets than SA at present, so potential investors would ask why they should be part of the SNO.

"The pressure on the new operator is also different now than it would have been had it been licensed three years ago. It will now have to be very nimble and quick on its feet, and it will have to come to market with something different, that will catch the public`s attention," he says.

"I said at the start of this year that the SNO desperately needed to be up and running by the third quarter of 2004. Well, we`re now at the end of the third quarter and, to use a baseball analogy, the SNO still doesn`t have a team on the field; Telkom is still playing a one-sided game."