SNO bidders neck-and-neck in final race

Johannesburg, 09 Jul 2003

The public hearings into the bids for the second network operator (SNO) licence are due to take place next week - on 17 and 18 July - and should be the final hurdle before the long-overdue licence is awarded.

The two recommended bidders, CommuniTel and Two Consortium, appear to have similar offerings in terms of solid partners that bring experience to the bids, well thought-out business plans and strong social responsibility programmes.

Both bidders will have one day where they will face questions from their rivals and members of the public regarding their business model, roll-out plans and any other relevant issues, providing a clearer picture of their respective strengths and weaknesses.

Following these hearings, the two consortiums will be judged by the Independent Communications Authority of SA (ICASA) on specifically defined criteria, and the one that scores the highest will then be recommended to minister Ivy Matsepe-Casaburri.

Quietly optimistic

"ICASA is due to announce its recommendation regarding the winning consortium by around 15 August, which the minister will then be asked to ratify, so we could be about six weeks away from finally knowing the likely makeup of the SNO," says Mike van den Bergh, a director of the CommuniTel consortium.

"We are quietly optimistic regarding a positive outcome for CommuniTel in this process, as we have a vast array of talent, skill and a wide variety of experience within our group."

He says each of the consortium`s players have been carefully chosen to bring something important to the bid.

"For example, Telecom Namibia gives us immediate access to the undersea telephone cables, not to mention the experience they have in rolling out services in remote areas. They are also a highly competent operator," says Van den Bergh.

"The Umkhonto we Sizwe Military Veterans Association is a true broad-based empowerment vehicle, with the ability to reach into and deliver services into communities across SA.

"Gateway Communications [of which Van den Bergh is also a director] is the largest carrier of voice traffic in Africa, in addition to having a sizeable customer base in SA. Members of the consortium also have experience in rolling out easily a dozen-and-a-half successful SNOs worldwide," he says.

"One of our partners is British Telecom (BT), which - although not seeking an equity stake in the SNO licence - has pledged extensive support to CommuniTel, and along with Deutsche Telekom (via T-Systems and Detecon) we have the two largest players in Europe.

"In fact, I believe that in terms of the CommuniTel bid, this is the first time ever that BT and Deutsche Telekom have joined forces on a project of this nature."

Keeping a low profile

While CommuniTel has been fairly vocal during the course of the bidding process, Two Consortium has hardly been heard from, releasing virtually no information to the press.

"We have deliberately kept a low profile, as we wanted to focus all our efforts on our own bid, because we plan on being awarded the licence," says Per Jannson, director of business development at SwedTel, the majority shareholder in Two Consortium.

"We have been in SA before, having been part of a consortium that bid for the third cellular licence, and Swedtel has always operated on the principle of finding a strong local partner, which has a good footprint in the local industry."

Two Consortium includes SwedTel, local company Blue Planet - consisting of Mvelaphanda Holdings and African Footprint - and Telecom Management Partner, a wholly-owned subsidiary of Scandinavian operator Telenor.

Telenor has telecommunications operations in 14 countries in Europe and south-east Asia, while Swedtel has been involved in over 500 projects in the past 35 years in over 100 countries, in the management of the incumbent operations and as a new entrant.

"We know Telenor very well. There have been times when we have been in competition with one another, but we are aware that they also know the local market, having operated in other African countries before," says Jannson.

"Our main challenge, should we be awarded the licence, will be to find the balance between commercial viability - maintaining a sustainable business - and our social responsibilities."

He says that to this end, Two Consortium plans to develop a close working relationship with the underserviced area licensees, providing both the backbone network and billing and switching capacity to help make them more financially viable as businesses.

"There is a saying in the industry that for every direct job created, there is a spin off factor of 10, and we believe we`ll create in the region of 300 to 400 direct jobs initially, so you can see just how big the benefits might be in terms of job creation."

Time is of the essence

CommuniTel`s Van den Bergh says it is imperative that, regardless of which bidder is eventually awarded the licence, they must be ready to begin rolling out services immediately, as the country has already waited far too long for the SNO.

"To that end, CommuniTel has set up a 'war room`, so to speak, where we have, for the last few months, been planning exactly how our roll-out will take place, should we be awarded the licence.

"Basically, if the minister were to award us the licence in or around August, we`d be ready to begin working the very next day with the other SNO stakeholders, and expect to be able to deliver the first services as an SNO before the end of this year," says Van den Bergh.

Jannson says that Two Consortium is looking at taking things one step at a time.

"The first milestone would obviously be for us to be awarded the licence. Following that we would have to agree on the licence conditions with the other stakeholders [empowerment partner Nexus Connexion and state-owned partners Esi-Tel and Transtel] before looking at deploying the SNO."

"I believe that if we get the licence, we will begin rolling out our initial operations somewhere between three and six months after that," says Jannson.