Govt planning third operator?

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 08 Aug 2006

The Department of Public Enterprises is planning to set up a third national telecommunications provider to roll-out broadband nationally, that will include the assets of Eskom and national signal distributor Sentech, sources say.

Should the department's plan come to pass, the country will effectively have three telecommunications companies with government having a controlling stake in the incumbent Telkom, an indirect stake of about 30% in the second national operator (SNO) and will own 74% of the third player once it is formed sometime later this year.

Indian industrial and ICT conglomerate Tata, which owns 26.1% of the SNO, will also own a share in the third operator.

Today, the SNO issued a statement on the infrastructure it has acquired from Transtel for R256 million.

SNO MD Ajay Panday said in the statement: "We are on track to switch on international wholesale services at the end of August. This transaction serves as a major milestone for the SNO. The availability of these assets to the SNO from Transnet will further facilitate the introduction of our enterprise services by the end of this year."

Appeasement

A source close to SNO shareholders says: "Tata had to be given the stake as an appeasement by the public enterprises minister [Alec] Erwin, because it upset their investment plans in the SNO. The third operator will essentially be a competitor to it."

The source says a proposal from within the department surfaced in July last year, during the signing of the memorandum of understanding between this department and the SNO shareholders that would lay the basis of the sale of certain Transnet and Eskom infrastructure to the SNO. In return, the two parastatals would each own 15% of the SNO.

"However, at the last moment, just before the signing at the Park Hyatt Hotel in Johannesburg, departmental representatives came up with this proposal to lease the infrastructure," the source says.

Last year, Erwin caused some upset when, at the last moment, he demanded two changes to the agreement of the transfer of the Eskom and Transnet assets.

These were that government held the pre-emptive rights to the shares held by Transtel and Eskom in the event that either of them decided to sell, and, secondly, the preservation of the government's access to and usage of Transnet's and Eskom's servitudes in the SNO. These give the companies the right to appropriate property they might need for their infrastructure development.

Asset sale

"The Transnet asset sale was too far down the line to stop. However, the sale of the Eskom assets, which have been written off, had not proceeded and it made sense to stall until after the promulgation of the Electronic Communications Act, as the new entity would have been contrary to the stipulations in the Telecommunications Act, which it replaces," the source says.

Communications minister Ivy Matsepe-Casaburri said in her 2006 budget speech that her department and public enterprises were working closely together to bring broadband to the country in general and she announced the appointment of a Broadband Advisory Council.

"Essentially we have become frustrated by the slow pace at which Telkom is rolling out broadband and the pace of the SNO," one of her senior aids said at the time.

News that the SNO would lease Eskom's infrastructure does not sit well with the SNO shareholders, the source says. "A company such as the SNO wants to own its infrastructure, because that is what it is about."