SOEs don`t want to run the SNO

Johannesburg, 15 Aug 2003

While it appears that Nexus Connexion, the 19% empowerment segment of the second network operator (SNO) licence, is confident that it and the state-owned enterprises (SOEs) - which own the other 30% - can roll-out the SNO on their own, at least one of the SOEs disagrees.

Transtel, which along with Esi-Tel constitutes the SOEs, says it never had any intention of following such a course of action, should neither of the current bidders for the 51% stake be awarded the licence.

Paulo Froes, Transtel`s SNO programme director, says the organisation has never wanted to run an SNO, as it wants to focus on its core business of logistics.

"While telecoms is a vital part of logistics - hence our involvement in the SNO process - our position is that we do not want to be a telco operator, we want to concentrate on becoming a strategic logistics supplier throughout Africa," says Froes.

Yesterday ITWeb reported that Kennedy Memani, chairman of Nexus, said Nexus is confident of its ability, along with the SOEs, to begin launch preparations immediately for the SNO, should the minister reject the two bids.

Froes says that what he has failed to consider is that if they go it alone, the SOEs and Nexus will have to increase their equity in order to cover the monetary injection that the strategic equity partner (SEP) would have brought into the SNO.

"Transtel has thought things through properly, and we have realised that it is a far more difficult concept than they may have initially thought. Also, I don`t think government is too keen on having another parastatal-style telco operator," he says.

"We are worried about the concept of possibly warehousing the 51% stake, as has been proposed in some quarters," says Froes.

"If we go ahead without an SEP, with the intention of bringing one in at a later stage and then this [third round of bidding] also fails to bring in an SEP, Transtel will in effect be left holding the baby, with no form of escape clause either."

He says that while it is only speculation on his part, he foresees one of two possibilities, should neither bidder be awarded the licence.

"Either we will be forced to go it alone, in which case we will need government to come to the party and put safeguards in place to protect the interests of the SOEs, or otherwise government can accelerate its convergence policy and move quickly towards a fully liberalised market, negating the need for an SNO."

Commenting on the Next Generation report on the two competing bids, Froes says he believes it raised some valid issues, although there were also some obvious inconsistencies or misunderstandings in the report.

"The important thing though, is that we are of the opinion that there is still enough value on the table from the bidders that we can negotiate with whomever is awarded the licence," he says.

"Even though neither bid is truly ideal, we feel that we should at least be given the opportunity to negotiate with the SEP in order to try and make a go of it. Very few matters like this are resolved legally, they`re usually sorted out around the commercial table."

Esi-Tel stated that at this stage of the process, no one on its team was prepared to comment on the SNO.