The cho­sen few

Who’d qual­ify to ap­ply for spec­trum if Icasa re­mains firm on its oner­ous em­pow­er­ment re­quire­ment?

Finweek English Edition - - Communication & Technology - BELINDA AN­DER­SON be­lin­daa@fin­

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

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