Nexus Connexion, the empowerment group likely to hold 19% of the second fixed-line telephone operator, has proposed a structure which will ensure it has control of some of the billions of rands that will flow in procurement spending for the operator.
Gone are the days of having passive investors. The SNO] needs hands-on involvement and we understand the issues.
Kennedy Memani, head, Nexus Connexion
Nexus will hold a significant stake in what could grow to a major South African company within years. That is if it can raise R1 billion, be accepted by Communications Minister Ivy Matsepe-Casaburri and weather potential challenges from losing bidders.
The empowerment consortium was this week announced as the bidder preferred by the Independent Communications Authority of SA (ICASA) to hold the 19% of the second national operator (SNO), which is to compete with Telkom from 2003.
It must meet certain conditions, such as proving within 60 days it has access to at least R1 billion and that its shareholders dilute their holdings to offer 40% of the company to small shareholders. If it can do so, and Matsepe-Casaburri endorses the decision, it will join parastatals Transtel and Esi-Tel to make up 49% of the SNO.
Despite being the junior partner in the eventual company, Nexus says it has no intention of sitting on the sidelines.
"Gone are the days of having passive investors," says consortium head Kennedy Memani. "[The SNO] needs hands-on involvement and we understand the issues."
Nexus will be pushing for two, or even more, appointees to the board of the SNO. But its real involvement is likely to be through an operational company it refers to as OPCO.
"OPCO will work closely on a day-to-day basis with both the SNO and the SNO`s suppliers," Nexus says.
It envisages that OPCO will control 30% of the total procurement of the SNO, the portion it suggests should be directed towards other black empowerment companies. That will make it a significant force in the local telecommunications scene as the SNO is expected to spend several billion rand on infrastructure and systems in its first years of operation, and continue to maintain high capital expenditure for decades thereafter.
OPCO is also to hold at least partial responsibility for human resources and training for the SNO, which will have an appetite for skilled workers. It will "facilitate the SNO`s access to scarce black economic empowerment employees" and manage their career development, Nexus says.
"During this process OPCO adds value to the SNO; and it takes away management responsibility of the empowerment process from SNO management in both procurement and employment equity," it says.
Nexus also says its involvement will save the SNO around 5% on the cost of its empowerment procurement and add about R100 million to the valuation of the company through its empowerment network.
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