The chosen few
Who’d qualify to apply for spectrum if Icasa remains firm on its onerous empowerment requirement?
ALTHOUGH MANY HAVE ARGUED that enforcing the requirement of a 51% black economic empowerment ownership stake on potential new wireless players is overly onerous, who would qualify to be awarded WiMax spectrum should regulator Icasa not change its tune? That depends on which so-called alternate telcos are eventually awarded individual electronic communications network service (i-ECNS) licences – the first step towards being able to apply for spectrum.
Africa Analysis telecoms analyst Dobek Pater says he didn’t expect spectrum licence applications or adjudications to take place until probably second quarter 2009. As to who would qualify to apply for spectrum will become clearer once the outcome of the Altech Autopage High Court application against Icasa and Communications Minister Ivy Matsepe-Casaburri is known. Altech asserts the minister gave value-added network service licensees such as itself the right to self-provide their networks. Judgment is expected soon.
If Altech fails in its application and Icasa reverts back to its competitive process, then there are a handful of operators that seem highly likely recipients of iECNS licences (and hence can apply for spectrum) given their size and existing market position. Those could include Vox Telecom, Dimension Data’s Internet Solutions, Naspers’s soon-to-be-sold MWeb, Verizon Business (which MTN is buying) and possibly Altech Autopage. However, the only one that comes close to meeting Icasa’s 51% empowerment requirement is Vox.
All the value-added network service (Vans) licensees had been required by Icasa to have 30% empowerment in order to receive that particular licence. Many
aren’t charmed by the fact that the goalposts have now been shifted.
Vox chairman Tony van Marken says confidently it intends reaching the 51% empowerment ownership mark before year-end. Its empowerment shareholding increased to 41,87% earlier this year after its shareholders took additional shares to help fund the Storm acquisition. At end-February the Lereko Metier Capital Growth Fund had 23,6%, Mvelaphanda 12,42%, Regiments Capital held 4,24% and Thembeka Capital another 1,61%.
However, Van Marken says its empowerment shareholding has since increased to 44%. He’ll elaborate on its plans to further increase that as soon as possible.
Meanwhile, Internet Solutions can’t yet say what it will do if Icasa sticks to its guns on 51% empowerment. Head of regulatory Siyabonga Madyibi says it’s still lobbying Icasa to maintain the current 30% requirement, which Internet Solutions already meets by virtue of the empowerment shareholding in parent company Dimension Data SA.
Andile Ngcaba leads a consortium that owns 25% of Didata SA, while other empowerment shareholders at the plc level account for the rest, says Madyibi. He adds that obtaining WiMax spectrum is crucial to Internet Solutions’ future business plans. Although it could gain access to the spectrum in partnership with other successful applicants, or by buying equity in those other companies, that wouldn’t be first prize.
Madyibi says Internet Solutions has buyin from Didata that it will commit capital to its WiMax rollout. “The challenge is to get it without losing control of the company.”
Of the incumbent players, both Vodacom and MTN want access to WiMax spectrum but have so far been denied it. Vodacom took a stake in Wireless Business Solutions (i-Burst) and works in partnership with it, while MTN launched a bid for Verizon Business. That deal is still subject to Competition Commission approval.
MTN must clearly be hoping Verizon is a serious contender for the spectrum. However, it buying 100% of the company would see 30% empowerment shareholders J&J Group’s Jay & Jayendra on their way out, decreasing its chances as a contender for spectrum in Icasa’s eyes. MTN’s group empowerment shareholding isn’t sufficient on its own.
MWeb is currently owned by media giant Naspers, but the latter announced on 2 June it was initiating an auction process of that business. Naspers says the reason is that it doesn’t own any other Internet service provider businesses and MWeb’s plans to invest in wireless broadband diverged from that of the broader group.
If MWeb wants to be a serious contender for WiMax spectrum, then the buyer should seemingly be an already empowered company. Any bidders would have to take a view on the likelihood of its getting an i-ECNS licence and subsequently also WiMax spectrum, which would affect the price they’d be prepared to pay for the asset.
Altech Autopage currently doesn’t have an empowerment shareholding, although group CEO Craig Venter said at its recent AGM it was working towards complying with the 30% promised to Icasa as part of receiving its Vans licence.
However, if it succeeds in getting an iECNS licence and wants to apply for spectrum, it would have to do more than that. Another alternative Venter also mentioned previously could be to form a consortium to roll out a WiMax network.
Another industry analyst says apart from the usual suspects there were a host of other, less well-known players just waiting in the wings to get their hands on WiMax spectrum. Some – which must already be well empowered – were pleased with Icasa’s 51% empowerment requirement.
Pater said Irene Charnley’s Smile Telecommunications and UniNet, in which former Telkom CEO Papi Molotsane’s company Synglo bought a 65% stake, would probably also be interested in obtaining WiMax spectrum. There were also some smaller Wi-Fi players in the Western Cape region but it was unclear whether they’d want to diversify into setting up bigger networks. But again, that would depend on their success at being awarded i-ECNS licences.
Pater says the environment would unfortunately lend itself to fronting and underhanded deal making, where a smaller 51%owned empowerment entity applied for and succeeded in obtaining a licence and then partnered with a larger player to build a network and deliver services.
Targeting 51% BEE by this year. Tony van Marken
Lobbying Icasa. Siyabonga Madyibi
Environment lends itself to fronting. Dobek Pater