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Internal spat erupts at SNO

18 Mar 2004

South Africa’s second national operator (SNO), which is yet to be awarded its operating licence, has run into a series of hurdles this week, further delaying its efforts to enter the fixed line market. The company, which will become the first competitor to monopoly operator Telkom South Africa when it launches services, is owned by a consortium of five shareholders – Nexus Connexion (19%), Eskom Enterprises (15%), Transtel (15%), Two Consortium (13%) and Communitel (13%); the remaining 25% is held by the state. The five owners have been trying to devise a strategy for the SNO for when it launches, but plans have been sidetracked by squabbles over the right to control the company. Communitel and Two Consortium – owned by Swedtel (51%), Blue Planet (30%) and Norwegian shareholder Telecom Management Partners (TMP) (19%) – have joined forces and are arguing that their combined 26% stake should give them overall control of the SNO, but the other shareholders claim that neither has the funds or the ability to do so. Any progress with the launch of the operator will be delayed until the matter is resolved.

Meanwhile, the situation at Two Consortium is also in shambles, after TMP announced today that it was planning to withdraw from the alliance. The company said it had more important ties elsewhere in Africa, but the chairman of Two Consortium, Kwame Amuah, said that the group would not be affected by TMP’s departure.

The process to establish the SNO began in 2002, at which time it was expected that licences would be issued in 2003 or early 2004 at the latest. However a lack of interest and a number of ‘unsuitable’ bids meant that the process was halted before it had even begun. When the SNO finally launches, Telkom will be required to allow the newcomer to use all of its telecommunications facilities for the first two years of its licence, on a resale basis, so as to enable national service-based competition until the carrier can roll out its own infrastructure. At the end of September 2003 (latest available figures) Telkom had a total of 4.81 million lines in service, translating to a penetration rate of 10.5%. Subscriber growth has come to a virtual standstill over the last three years, but the regulator hopes it will begin to take off again with the advent of competition.

South Africa, Telkom South Africa
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