Legal issues cloud SNO licence

Johannesburg, 17 Sept 2004

The minister of communications has pressed ahead with the awarding of the second national operator (SNO) licence today, despite the dark clouds of pending legal action against her.

A statement issued by minister Ivy Matsepe-Cassaburri`s office today says she has granted to the SNO comprising Nexus Connexion, Transtel, Esitel, WIP Investments Nine trading as CommuniTel, Two Consortium and the remaining unallocated equity shareholder, a licence to provide public switched telecommunications services, subject to the following conditions:

* Acceptance of the shareholding and control structure of the SNO.

* Finalisation of and agreement on the business plan.

* Finalisation of the shareholders and subscription agreements.

As stated in the 26 August announcement, a new company will be incorporated which will hold 51% of the equity share capital of the SNO.

In terms of the procedure, the minister awards the licence, then the regulator (ICASA - the Independent Communications Authority of SA) finalises the terms and conditions, and then finally issues the licence with the conditions attached.

Transtel CEO Karl Socikwa says the final issuing of the SNO licence by ICASA rests on the process which will see the various components happen in parallel.

Socikwa says the three elements of the process going forward are the selection of the SNO partners, the integration of the various companies to create one entity, and then the final issuing of the licence by ICASA.

"What we have come to expect from ICASA is that they issue a timeline stating when they will hold public hearings and when written submissions have to be made so as to keep the process as transparent as possible," he says.

No champagne yet

BMI-TechKnowledge MD Denis Smit says while the news is good, the industry will continue to hold its breath until the issuing of the licence.

"There is still a business case for the SNO, but the conditions precedent have not been met and they are unlikely to be for the time being," he says.

One of the original bidders, Optis Telecommunications, has instituted legal action against the minister to stop the awarding of the licence until the judicial review is completed. However, the Pretoria High Court yesterday upheld the minister`s point of view that the licence announcement must happen.

However, Optis` attorney Bradley Allison says: "My client will continue with his action, especially in the light of Nexus restarting theirs."

Telkom, the SNO`s future main competitor, issued a statement saying it welcomes robust competition and consumers will benefit from the greater choice that will be offered.

Industry divided

CommuniTel`s Mike van den Bergh says the organisation welcomes this as an important and positive step forward, but it had hoped to achieve greater clarity on the investor who will get the unallocated equity.

"The lack of clarity on this issue is currently impeding our progress towards formulating a business plan and shareholders agreement," he says.

"A key factor here is also that the minister has awarded the licence, but the regulator still has to issue it, so effectively all she has done is made it ICASA`s problem."

Andre Wills, a telecoms analyst at Africa Analysis, believes that, based on the way the announcement has been phrased, all the minister has really done is shift the ball into ICASA`s court.

"It is also interesting that the licence has been awarded when the control of the SNO will lie in the hands of an unknown entity, as the 26% shareholding in Sepco is still to be decided," he says.

"I do feel the liberalisation announcement has left the SNO in a position where it will have to compete more at a structure level than at a service level, but this is probably a good thing, as ultimately we need more infrastructure in SA.

"The main thing is that, even though there`s still a long road to travel, I feel it is finally time to put the champagne on ice, so that it`s ready to be opened when the SNO actually enters the market."

Ant Brooks of the Internet Service Providers` Association is not as optimistic.

"It is nice to see that the minister is still giving the SNO the attention it warrants, but I don`t feel we`re any further down the road now than we were six months ago.

"The fact that the ball is now in the regulator`s court could be seen as a bit of buck-passing, but I think it demonstrates that at least she is prepared to let ICASA do its job.

"I think it is only fair to give the minister a bit of credit too, as she has now done all she can and it is now up to the SNO`s shareholders to drive the process forward. The entire SNO issue may still be a mess, but I don`t think we can blame the minister any longer."