Cell C has been confirmed as the consortium the South African Telecommunications Regulatory Authority (SATRA) intends to recommend to the minister of communications. To ensure transparency in the process, SATRA has also released its evaluation of the bids, although some details remain confidential.
The bidders were scored as follows: Cell C at 76, Telenor/Telia at 69, NextCom at 64, Khuluma 084 at 61, AfricaSpeaks at 57 and FMN at 33.
Bids were evaluated on the business plan, empowerment aspect, technical plan, the provision of universal service and the impact the bidder will have on the telecommunications industry and consumers.
Here is what SATRA had to say about the six bidders.
AfricaSpeaks
AfricaSpeaks' ability to compete with the incumbents was relatively weak. This was demonstrated through marketing and financial plans that were not strong enough to compete with the incumbent operators. A further potential obstacle to AfricaSpeaks' ability to compete was the hybrid technology that they proposed - a combination of GSM, CDMA and iDen that has not been tested anywhere else in the world. Further, AfricaSpeaks failed to demonstrate that they had the experience in competitive markets, or that they would have the expertise to set up and maintain a network of the size and nature that they proposed. In terms of empowerment, AfricaSpeaks was majority black owned, with a wide spread of empowerment entities. With regard to universal service their universal service section of the bid was comparable to that of the other applicants with solid commitments, but no stated universal service budget.
Cell C
Cell C demonstrated through its application that it had the financial resources necessary to successfully roll-out a cellular network as well as considerable financial depth through Saudi Oger. The applicant further demonstrated that it had the financial resources to compete effectively with the incumbent operators. Further, the financing structure of the BEE partner was solid. The shareholding is divided into 60% Saudi Oger and 40% Cellsaf (SA), and the empowerment structure guarantees the non-dilution of the BEE component below 40%. Cellsaf's partnership with GTE, a well-experienced management and operation partner, will supplement the experience of their operating partner Saudi Oger. Cell C was able to illustrate a firm commitment to universal service supported by well-planned, coherent community service obligations, and a universal service budget of 0.4% of annual revenue. In addition, the technical plan of the applicant was good. For these reasons, the authority concluded that, in respect of all of the evaluation criteria, Cell C's application was of a particularly high standard.
FMN [Five Mobile Networks]
FMN indicated that it was not interested in competing with the incumbents, but wanted to address the need of the rural and under-serviced market. While this is a laudable goal, it would be inconsistent with the objective of encouraging competition between the incumbent operators and the new licensee and of achieving the benefits to be derived from such competition. FMN demonstrated a commitment to universal service and addressing the needs of those often neglected in our society, however, this aim was not accompanied with a demonstration of the necessary financial depth. Further, the technology solution that FMN selected, GSM 1800, which is a capital-intensive technology, would not be the best means of addressing the market they had targeted. One of FMN's key weaknesses lay in the fact that FMN, in their application, did not address the questions of the ITA directly.
Khuluma 084
Khuluma 084's marketing plan was fair when considered alongside its technology choice. The unavailability of EGSM 900 and GSM 450, two of its core technology choices, could pose a problem. Further, the applicant was not able to demonstrate that its foreign partners would provide the necessary financial support, or have enough experience in competitive markets, thus reducing the applicant's ability to compete. Khuluma 084's strength lay in its corporate structure and empowerment plans. While the BEE shareholders had 49% of the shareholding, their representation on the Board was even more substantial. Further, the BEE groups were diverse and representative of all of the historically disadvantaged groups in South Africa. However, because of the weak financing structure of the BEE groups there is a high risk of dilution. Although the applicant did not quantify its commitments in respect of Universal Service, it did have a universal service budget, which will take effect in Year 3. Although this indicated the applicant's commitment to universal service, it was a matter of concern to the authority that the implementation of the applicant's proposals in this regard would be delayed until Year 3.
NextCom
NextCom's application was presented in a professional manner and it provided detailed information in respect of all the applicable evaluation criteria. NextCom has a highly optimistic marketing plan. While this may be perceived to be a strength, upon closer scrutiny, it appeared that it was unlikely that the applicant would achieve its ambitious objectives in respect of market share. In addition, it appeared that the financial partners might not have the financial depth to support the applicant given its highly ambitious plans. Its choice of technology, GSM 1800, while appropriate for urban areas, would be too capital intensive and thus not cost-effective to roll-out in rural and under-serviced areas. Although the applicant has a 60% BEE shareholding, the authority was concerned that this fact, coupled with the lack of financial depth on the part of the applicant's foreign partner, might create difficulties for the applicant in raising the financing required for the implementation of its ambitious plans. With respect to universal service, Nextcom was able to propose a coherent universal service strategy, quantify their commitments to universal service, and propose a reasonable universal service tariff. However, it failed to provide any budget for the implementation of its universal service proposals.
Telenor/Telia
Telenor/Telia demonstrated that it had the potential to provide very strong competition to the incumbent operator, particularly because of its experience in competitive markets internationally, and its strong financial backing. Although Telenor/Telia had a strong business and financial plan, its commitment to universal service, and its commitment to empowerment were relatively weak. The applicant was not able to demonstrate through community service obligations, and empowerment plans, a commitment to addressing the social concerns in South Africa, or an understanding of the social and economic issues affecting the local market. The technical plan of the applicant was good.
SATRA received three other applications. The Zintatu consortium was disqualified because it did not make a complete application and failed to pay the application fee. Afrozone withdrew its application in July and Spatial Cellular withdrew in October.
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