Confusion over govt's Neotel cash option

By Paul Vecchiatto, ITWeb Cape Town correspondent

Johannesburg, 10 Aug 2007

Neotel is not aware of any cash payment made by government in lieu of the transfer of the Easitel and the outstanding Transtel assets, spokesperson Marla Suriah says, in a situation which has caused much confusion in the telecommunications sector.

Last week, Department of Public Enterprises deputy director-general for legal affairs Sandra Coetzee told Parliament's public enterprises committee that government had decided to exercise the cash option for the combined 30% Neotel shareholding held by Eskom and Transtel, when it decided not to transfer the assets of both to the second national operator.

"We did this in terms of the old Telecommunications Act, because we believe that Neotel would not necessarily compete directly with Telkom," she said.

The DPE has used this as part of its reasoning for the creation of Infraco, as a state-owned enterprise to supply low-cost broadband on a national basis. A draft of the law that will govern Infraco is currently before the Parliamentary Portfolio Committee on Public Enterprises.

The decision taken by public enterprises minister Alec Erwin two years ago not to transfer those assets, has meant a delay in the launch of a competitor to incumbent telecommunications utility Telkom, and has led to widespread criticism about the cost of broadband in this country.

Dave Smith, Infraco's CEO, says no lump sum has been paid upfront to Neotel, but rather cash payments have been made as part of the shareholder subscriber agreement, which has not been made public.

"There is no reason for us to have made an upfront cash payment. That does not make business sense as we would be giving the other shareholders a free ride," he says.

Concern

As part of the new agreement between the DPE and Neotel, the latter would receive a four-year exclusivity deal with Infraco to market its products. However, parliamentarians voiced concern over that, saying it seems such an agreement would itself create another "Telkom situation".

Coetzee could not say last week how much had been transferred to Neotel or when.

Neotel's Suriah says the only approved transaction was the April transfer of the Transtel metropolitan networks to Neotel at a price of R266 million.

"We are not aware of any other transaction," she says.