Transtel says the fact that Two Consortium is willing to increase its up-front investment in the second network operator (SNO) licence - by making another R142 million worth of equity available - is useful, but is by no means ideal.
This follows the news that the consortium has increased its equity stake from R220 million to R362 million, which will, in turn, give it the scope to negotiate the purchase of Transtel`s full service network (FSN).
Transtel values the FSN at R1.6 billion, while Two Consortium has valued it at R1.2 billion.
"We as Transnet stated when Two put forward its best and final offer (BFO) that it did not have a negotiating position and we would not have even been prepared to come to the negotiating table with them," says Paulo Froes, SNO programme director at Transtel.
Transtel, the telecoms segment of Transnet, along with Eskom`s Esi-Tel owns a 30% stake in the SNO, while black empowerment company Nexus Connexion owns the other 19%.
"The fact that they have raised their equity will increase the value of the 30% stake, which is good for us. Two has also agreed to change the way it will pay for the FSN, although it has not given us details as of yet.
"Although the situation as it stands is by no means ideal yet, at least it shows that Two are willing to compromise and change. This certainly brings both parties closer to the negotiating table," says Froes.
"By the same token, I would not say that we are absolutely excited about the additional equity. It is definitely not a marriage proposal, so to speak, but any news that the potential buyer is prepared to negotiate the price upwards is always welcome."
Letters of commitment
According to Two`s Michael Nahon, the company is not attempting to change its BFO, but - along with its answers to questions the regulator asked for clarity on at the recent public hearings - it has included letters of commitment showing that it has the ability to up its equity stake.
"Since entering our BFO we have had more time to meet the other people involved, such as Nexus and the state-owned enterprises, and we have discussed a number of issues with them, which has led to us showing that we are capable of putting additional equity on the table," says Nahon.
"While our initial up-front investment was placed at R220 million, it was conservative. We chose not to take a wild shotgun approach and talk in terms of billions of rands, but we want to make it clear that we can put in more."
He says one cannot really say the BFO is a true business plan. It is simply an academic submission and would obviously be subject to change as negotiations continue with the other parties.
"Once we have gotten the variables out of the way, we can sit and negotiate properly with the various players, rather than getting hung-up on numbers that will alter anyway, as these negotiations take place."
Regulator`s responsibility
Asked whether CommuniTel had any issues with Two increasing its equity after the BFOs have already been delivered to the Independent Communications Authority of SA (ICASA), a spokesman for the consortium said: "We would not want to comment on what the other bidders are doing, but are of the opinion that it should be left up to ICASA and that the regulator will deal with it appropriately."
Unofficial comments from industry players have suggested that Two is effectively "trying to get the teacher to change the marks after the exam has already been written".
Another insider suggested that should ICASA take the new information into account when weighing up the bids, it may well set a precedent that could lead to legal action.
ICASA was not available for comment.
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