SNO ready to take on the monopoly

Johannesburg, 08 Feb 2005

While rumours abound regarding the identity of the second national operator's (SNO's) soon to be announced 26% shareholder - with popular opinion favouring Indian company Tata Africa - the remaining shareholders have been quietly going about their business, making the SNO stronger.

ITWeb spoke to Karl Socikwa, CEO of Transtel and spokesman for the SNO, about the future for the long-awaited opposition to Telkom's monopoly, and what its status is.

Socikwa says that throughout the recent process, both Old Mutual Asset Managers and Tata Africa - the two bidders for the 26% shareholding - have been given access to the work done by Transtel and Eskom Telecoms to enable them to incorporate this into their plans.

"This exercise has not been structured as a formal due diligence, but rather a sufficient assessment of the network and plans to support a business plan. Finalisation of this plan will continue in parallel with the establishment of the actual company to be licensed," he says.

"There is another due diligence to be considered, which is a formal process that will take place should the SNO choose to acquire Transtel's (or Eskom's) current telecoms-related business as a going concern."

He says that Transnet has indicated that it intends to sell that part of Transtel, while retaining some of the mission-critical services that support railway and harbour operations, although Eskom has not yet indicated its final position.

"However, it is the first process that determines the timescale for the licensing of the SNO, which is why we are confident that we will have an SNO soon," says Socikwa.

"Transtel aims to complete the second process as rapidly as possible, in support of Transnet's strategic plans, but the key factor here is that this will not delay the SNO in any way."

No more disagreements?

When questioned about Nexus Connexion's court action to prevent CommuniTel and Two Consortium from holding a joint 25% shareholding in the SNO, he says that the 19% empowerment shareholder would be in the best position to comment on its intentions.

"However, an agreed joint business plan was produced by all of the identified shareholders in January 2004 and it is this strategy that will now be aligned with the successful bidder's plan," says Socikwa.

"We are therefore confident that it is now possible to create the SNO company, with committed shareholders, a strong business plan, and also with the ability to compete effectively against the incumbent."

He says that in many ways, the delayed liberalisation of the local market has worked in the favour of the SNO, as many new entrants created in the first days of market liberalisation in the 1990s, when the SNO was first conceived, faced severe challenges.

"Today, there is a new breed of challengers emerging in many markets - not clones of the incumbent carriers, but strong, focused players poised to take advantage of convergence and new market opportunities."

Asked about the SNO's come-to-market plans and its strategies for gaining market share, Socikwa says: "I'm sure Telkom would love to know. The SNO will build its strategy based on the best practice of challengers in other liberalised markets."

Liberalisation issues

There has also been some concern that the recent liberalisation of the telecoms market would adversely affect the SNO, particularly as more competition would lead to a smaller share of the pie.

"The latest version of the SNO business plan factors in the current changes, as well as the changes expected under the Convergence Act, and as we have repeatedly pointed out, what matters to us is certainty and clarity, not any specific detail of the telecoms environment," says Socikwa.

He claims that how the SNO approaches the market is central to its business plan, and cannot therefore be discussed in detail.

"For the SNO, it is clear that it is neither about taking advantage nor countering liberalisation, but about delivering appropriate services for all customers, both retail and wholesale. One needs also remember that in the wholesale market, one's largest competitors are often one's biggest customers," he says.

"Realistically, the SNO can be operational six months after the shareholding, business plan and licence conditions are finalised, and while these dates are dependent on the Department of Communications and the regulator, there are strong indications that these will be finalised very soon."