MTN passes on SNO

Johannesburg, 10 Sept 2002

MTN parent company M-Cell yesterday confirmed market expectations that it would not bid for direct participation in the second national telephone operator (SNO).

The company said in a statement that its board had deliberated on the investment opportunity but, "having duly evaluated the projected market impact of the SNO, as well as the funding requirements of participation", it decided to pass up the chance.

The SNO is expected to require huge capital investment in its first few years of operation and the only equity option open to MTN would be a 51% controlling stake in the operator. It is already heavily invested in the relatively new Nigerian cellular operator it controls, to the tune of R4 billion this financial year.

However, the company says its board does "favour the possibility of working with the SNO by providing access to the group`s wireless network and other resources".

Under the fixed-mobile licence to be granted to the SNO, it will be allowed to use limited cellular technology to provide services.

The decision is in line with both M-Cell investors` and analyst expectations but will do little to cheer the government. M-Cell is the only company to have publicly considered taking up the 51% stake earmarked for a large, probably foreign, operator. Bids for the stake were to be submitted by the end of August, but by the middle of that month the deadline was extended by two months.

Several observers have predicted a lack of interest due to the high levels of debt many telecommunications companies carry and an unattractive regulatory environment in SA.

Parastatal Transtel and Eskom Enterprises` Esi-Tel will jointly own 30% of the SNO. The Independent Communications Authority of SA has recommended that the remaining 19% go to empowerment consortium Nexus, although communications minister Ivy Matsepe-Casaburri has yet to confirm its selection.

ITWeb`s Lucas Ledwaba reports that Communications Ministry spokesman Robert Nkuna said government would be looking at new ways to entice foreign operators to bid for the SNO following M-Cell`s decision.

"We need to look at ways to accelerate communication with potential investors. We need to decide whether it is better for us to communicate with them (potential investors) from SA or whether we need to go out to them."

However, he said government remained confident that it would find a reputable bidder for the licence.

Meanwhile, MTN is again facing complaints from Nigeria that it is overpricing its services in that country. According to recent reports from Lagos, a human rights lawyer has taken the Nigerian Communications Commission to court, alleging that it is failing to protect users from outrageous pricing. MTN and other operators are co-defendants.

In July, parts of a report by an ad hoc committee on GSM were leaked to the Nigerian media. It said the prices charged by MTN and other mobile operators were far in excess of what is asked in SA. However, MTN says it is spending more money in Nigeria than it did in SA, and that a lack of infrastructure and the need for importing dollar-based equipment increases its costs.

Although MTN`s revenue from the average Nigerian customer is nearly three times that earned from every South African customer, its earnings before interest, tax, depreciation and amortisation margin for that country is -5%. In SA it is 33%.