Bidders disillusioned by rural licence delays

Johannesburg, 10 Jul 2003

The repeated delays in the final date for applications for the underserviced area licences (USALs) are placing an enormous financial strain on the bidding consortiums and leaving them unhappy with the way the process is being conducted.

The deadline, which was originally set for 30 April, was then amended to 30 June and has now been pushed back to 29 August.

According to Simon White, CEO of the Rural Telecoms Development Company (Ruteco), one of the consortiums bidding for the licences, the repeated delays are making life very difficult for the bidders.

"It is difficult to maintain the bidding process when the deadline for applications keeps being pushed back, as every month the viability of the project is limited further while the costs continue to increase," says White.

Dominic Mokhethi, chairman of the USAL National Interest Group, a lobby group representing the various bidders, agrees with this.

"We are really unhappy about this, as it is a real problem for the bidders. The USALs were meant for the SMME market, and the players in this arena do not have the financial resources to sustain themselves through all these delays," says Mokhethi.

"This process has already been going on for more than 20 months and the bidders are having to spend money on a daily basis, both on the regular running of their offices and on running workshops and community meetings in the relevant areas - which comes out of their own pocket."

He says that a comparison can be made between these licences and the awarding of the third cellular licence, which also experienced numerous delays.

"One has to remember that the bidders in that instance also complained about the high cost to their businesses that the delays caused, and they had far more financial clout that the USAL bidders do."

Contrasting views

These views on the matter are in contrast to that of the Independent Communications Authority of SA (ICASA), which said in a statement that it welcomes the decision by the minister of communications to extend the deadline for the USAL applications.

ICASA says that although the deadline extension will result in a delay in the issuing of the 27 licences for the rural areas, the regulator believes there will be more spin-offs than setbacks in the future.

The statement says that because USAL is a new category of licence, new regulations pertaining to ownership and control, interconnection and the Universal Service Fund (USF) need to be formulated.

Furthermore, the task of drafting a business plan for the USF needs to be finalised, as the fund will, among other things, help finance the roll-out of infrastructure.

While it is ICASA`s view that these factors are likely to positively impact on the bidders` business plans and chances of attracting financial injection from funding institutions, it seems that not all of the bidders agree with this.

"The delays are costing us major overheads and causing many problems for us, not the least of which is the view of the people in the underserviced communities, who are themselves stakeholders in the bids," says White.

"People at the grass roots level do not always understand why these delays keep taking place and as such, can easily become suspicious of the entire licensing process, which will cause further problems in the long run."

Mokhethi says that many people invested in the USAL project because they were under the impression that the licences would have been awarded by now and they would be getting a return on investment. Instead they are still losing money.

"Even if there are no further delays, it will still be a couple of months while ICASA evaluates the bids, then more time for the public hearings, followed by ICASA making its recommendations to the minister and only then will she award the licences. I don`t think we can realistically expect the licences to be awarded until at least this time next year.

"That, of course, is if everything goes according to plan. There is still a distinct possibility of further delays and we are beginning to ask ourselves whether it is worth our while to stay involved in the process."