The absence of individual-electronic communications network services (I-ECNS) ownership and control regulations has left the telecommunications sector open for repositioning and speculation, say market observers.
I-ECNS licences are roughly the new equivalent to the old public telecommunications switched network licences under the now defunct Telecommunications Act. These were considered a scarce resource, with only two companies - Telkom and Neotel - owning them. Possession of such a licence allowed a company to build its own networks nationally, own the local distribution infrastructure and even land undersea cables.
Altech's successful court action last year essentially did away with making such a licence a scarce resource, as it exploited a flaw in the licensing regime that essentially allowed any holder of a value-added network service (VANS) licence to convert this into an I-ECNS licence. VANS were allowed to provide services over a licensed telecommunications network that should have been comparable to an electronic communications services licence in terms of the Electronic Communications Act.
Originally, the Independent Communications Authority of SA (ICASA) stated any I-ECNS holder had to have a minimum of a 30% ownership by historically-disadvantaged individuals, or black economic empowerment criteria.
Putting it bluntly
“However, the Vodacom debacle of last month has meant this criteria has also fallen away,” says ICT lawyer Dominic Cull, of Ellipsis Regulatory Solutions.
“Crisply speaking, there is nothing stopping you transferring a licence.”
ICASA, along with trade union federation Cosatu, attempted a last-minute halt of Vodacom's listing on the Johannesburg Stock Exchange and lost the action.
This, along with the fact that there are now some 300 I-ECNS licensees, opens the market to other companies that may see opportunities in the South African market.
This has meant some licence-holders are willing to sell or transfer their licences to other parties, but at what price?
“ICASA has to approve the transfer, but this will cost R50 000. The question is 'why would ICASA object to any transfer or sale?', because all the prospective new licence-holder has to do is state it will undertake to meet all licence obligations,” Cull says.
Paying the price
Prices for an I-ECNS have reportedly ranged from R150 000 to as much as R600 000. However, there has been at least one case of a sale of just R1 500 from a bankrupt close corporation.
Johann Botha, a director of ISP Amobia, says the R50 000 administration fee is an inhibitor for small companies.
“I don't see why it should be so high, as now an I-ECNS is no longer a scarce resource as in the past. I think it is a good thing that people are able to trade in them and while there is the possibility of interesting things happening in this space, I have not come across anything definite,” he says.
Another ISP operator, who asked not to be named because he is in the middle of such a deal, says that, apart from outright transfer, a company could ask the other party for a back-to-back deal, whereby it lights fibre on its behalf, while the assets remain separate with an agreement to buy back these assets at a nominal price.
“One doesn't have to transfer directly one of these licences; one can either buy the whole company in its entirety or lease the licence from them. It all makes for some really interesting accounting,” he says.
A second lawyer, who asked not to be named for professional reasons, says the prospect of other players entering the local market with services and products that they were not allowed to offer before the Altech court action “makes for some very interesting speculation”.
However, he says, the real inhibitor to bringing down the cost of telecommunications is the local loop, on which ICASA still has to formulate its regulations.
“ICASA is working on this slowly and is looking at unbundling the loop in two ways. Firstly, by implementing carrier preselect and then access to the local exchanges,” he says.
ICASA is due to present before the Parliamentary Portfolio Committee on Communications this evening and was not available to comment this morning.
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