The Department of Communications' (DOC's) award of a long-awaited tender to audit spectrum use in SA has raised concerns, due to the winning bidder's links to two of SA's largest telecoms companies.
Hopelafleur Communications Networks won the R7.9 million contract, to audit frequency in the 500MHz to 1 000GHz range, towards the end of January. However, the company's only director is Julia Hope, who sits on Telkom's board and is married to a Vodacom senior staff member.
The company's win is being questioned, because of the potential conflict of interest due to Hope's relationships with the aforementioned telcos. In addition, Hopelafleur's bid was 20% more expensive than the other company that bid for the tender.
The spectrum audit will determine which companies hold licences for which spectrum, and for what purpose. The results will be used by government to determine how spectrum can be used more efficiently, and locate frequency that is not being used.
The DOC previously warned it will implement a use-it-or-lose-it principle, as spectrum is a valuable commodity and operators are reaching congestion stage on current allocation.
Industry relationships
According to information from the Companies and Intellectual Property Commission (CIPC), Hopelafleur's only director is Hope. Hope is also a Telkom non-executive director and is married to Vodacom's executive head of technical regulation, Mortimer Hope.
Hope, who has an MSc in engineering telecommunications from the Moscow Technical University of Communications and Information Technology, was appointed to Telkom's board in November 2009.
She has more than 15 years' experience in the electronic communication industry and has worked in broadcasting and at the Independent Communications Authority of SA (ICASA).
Hopelafleur, the only company with such a name registered with the CIPC, provides PC hardware, software and consumables sales; training; an Internet caf'e and coffee shop; as well as networking solutions and consultancy services, according to its Web site.
Happy outcome
Communications minister Dina Pule's spokesperson, Siya Qoza, says the process required that bidders declare interests that are relevant to the tender. This was done during the tender and DOC is “satisfied with the outcomes”, he says.
The contract was awarded based on price, ability and technical expertise, says Qoza. “Hopelafleur has partnered with local and international partners who have suitable experience to conduct the spectrum audit.”
According to the DOC's Web site, the only other company to tender was LS of SA Radio Communication Services. MD Koenie Schutte says LS's bid was R6.3 million, which is about 20% lower than Hopelafleur's tender.
Qoza says bids were “within a very narrow price range”.
Unfair advantage
Bart Henderson, CEO of risk management consultancy Henderson Solutions, says if the process interrogated the bidders' relevant interests, which could potentially be impacted by the audit outcome, the winning bidder should not have won on the basis of the potential for a conflict of interest.
“If the question is whether the awarding of this contract justifies an investigation, the answer is without a shadow of doubt.”
Vodacom spokesman Richard Boorman says the company is “comfortable” that there is no conflict of interest as the tender relates to a study of spectrum, and not its allocation. Telkom did not respond to a request for comment.
Flawed process?
Mobile operators have been waiting since 2009 for the audit, which was finally set to get off the ground early last year. However, several attempts to auction spectrum use stalled until the department finally appointed Hopelafleur last month.
Dominic Cull, owner of Ellipsis Regulatory Solutions, says the audit is “absolutely and utterly critical”, as SA is on the brink of developing spectrum plans and assigning frequency. He explains that ICASA needs the information from the audit to allocate space.
Cull says, while a conflict of interest may not arise in reality, there is the potential that the companies could benefit from inside knowledge.
The DOC must “take every possible step” to make sure the audit cannot be challenged, says Cull. He says it would have been better to award the tender to a neutral party as the DOC cannot afford to have this process “tarnished by any actual or perceived conflict of interest”.
Hope refused to comment, saying she would not respond to any of ITWeb's questions.
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