Nexus, SOEs prepared to go it alone

Johannesburg, 14 Aug 2003

Nexus Connexion, the 19% empowerment segment of the second national operator (SNO) licence, has confirmed that it and the state-owned enterprises (SOEs) will be prepared to "go it alone", should the communications minister reject both bidders for the 51% equity stake.

The company says time constraints may rule out a third round of applications, as the deadline is looming for SA to meet its World Trade Organisation obligations to have a duopoly of fixed-line telephone operators.

The first round of bidding failed when the Independent Communications Authority of SA (ICASA) rejected the two bidding consortiums - Goldleaf and Optis - because they were not considered strong enough.

"We have enhanced our own organisational capacity to contribute to the leadership of the SNO and have arranged, on commercial terms, the support of leading international telecoms experts to complement its own and those of the SOEs," says Kennedy Memani, chairman of Nexus.

"Nexus is confident of its ability, along with the SOEs (which hold the remaining 30% stake), to begin launch preparations immediately for the SNO, should the two bids be rejected by the minister.

"We didn`t just want to throw our hands in the air and wonder what we will do next if the bids are again rejected, so we have spent a lot of time looking into the market and have found that there are many skills available out there."

He says that the US, in particular, has an abundance of the type of skills that Nexus and the SOEs would like to align themselves with, should they make a go of running the SNO without a strategic equity partner (SEP).

Memani believes that in the current market conditions, launching the SNO without a traditional SEP makes sense.

"It is a perfectly workable solution that will bring competition into the South African fixed-line telephone market without further delay. We definitely have the skills and are quite prepared to do it on our own," he says.

"The market is such that the big telecoms operators are not keen to invest the kind of money that the government wants from an SEP, therefore the market needs to become more creative in how it rolls out a structure like the SNO."

Commenting on the Next Generation report that analysed the two SNO bids, Nexus says it agrees with the analysis in the report, which mirrors many of the concerns about both applications that were raised by Nexus at the hearings, including their control structures and funding ability.

"As far as we are concerned, the Next Generation report is a true reflection of the discussions that went on at last month`s public hearings," he says.

"What appears to be a second failure to attract a true international strategic equity partner does not affect Nexus`s confidence in government`s ability to quickly license an SNO, and we feel that the failure to identify a true SEP is due mainly to global factors affecting the telecoms industry.

"Nonetheless, we are confident that the SNO remains an excellent investment opportunity," says Memani.

He says the Next Generation analysis was complimentary about the combined market knowledge, business planning skills, financial capacity, technological and operational capabilities of the existing equity partners in the SNO.

"This analysis substantiates the comment Nexus made during the hearings that this partnership is more than adequately equipped to start the SNO roll-out, should ICASA and the minister so decide."