Neotel exclusivity as Infraco takes shape

Paul Vecchiatto
By Paul Vecchiatto, ITWeb Cape Town correspondent
Cape Town, 03 Apr 2007

Second national operator Neotel will have a four-year exclusivity period with Infraco. It will also become the marketing arm for government's new broadband supplier, says the Department of Public Enterprises (DPE).

While this could position Neotel to compete with Telkom in the broadband arena, it is not yet known how the agreement will impact the market. More clarity is expected to emerge at a future Parliamentary briefing.

The four-year exclusivity period mirrors an exclusive telecommunications services supply deal government awarded to Telkom after the company's partial privatisation and listing in 2002. Telkom was initially granted a two-year exclusivity period, but this was inadvertently lengthened by another two years due to the delay in Neotel's licensing.

Vilma Maistry, spokesperson for public enterprises minister Alec Erwin, has confirmed remarks made by members of the department to the Parliamentary Portfolio Committee on Public Enterprises last week, during an informal question and answer session.

According to Maistry, Infraco will be positioned as a "schedule two" company, in terms of the Public Finance Management Act, meaning it will report directly to the minister responsible, rather than the National Treasury.

However, it is yet to be determined if Infraco will be given enough autonomy to raise its own funds outside of government structures, such as electricity supplier Eskom, or if it will have to go to government for its entire budget allocation, such as national signal distributor Sentech, Maistry says.

Behind schedule

The DPE has still not scheduled a full briefing to Parliament on Infraco, even though it had promised the new broadband supplier would be operational by March.

Deputy president Phumzile Mlambo-Ngcuka previously said Infraco's business plan needed some "fine-tuning".

In a Financial Times article, quoted in today's Business Day, president Thabo Mbeki said government would support another West Coast cable that would have far more capacity than the existing SAT-3 cable controlled by Telkom. Government briefing documents, in ITWeb's possession, confirm one of Infraco's projects would be to lay that cable.

Dene Smuts, Democratic Alliance MP on the Parliamentary Portfolio Committee on Communications, says the latest Infraco news was to be expected.

"They have had to do something to compensate Neotel's investors [Indian conglomerate Tata] as they were expecting to own the infrastructure that is owned by Easitel and Transtel," she says.

Smuts says a four-year exclusivity period for Neotel may seem a long time, but a lot will depend on what happens after that, such as ensuring non-discriminatory access to the network and government not allowing another Telkom situation to develop.

"Erwin seems to have toed the line as far as the Electronic Communications Act is concerned," she says.

Neotel could not be reached for comment at the time of publication.

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