JOHANNESBURG, South Africa-The debate of issuing a third or fourth cellular license in South Africa is gaining momentum, with the industry pressuring the government to speed up the tendering process before the existing operators become so powerful they would eliminate any other competitor.
“We recommend that license applications for a third cellular license should be processed within two months,” said T.J. Nazo from the COSATU labor union’s investment arm Kopano KeMatla. “The applications process should run through as fast as possible, as all delay(s) will jeopardize the business potential of the operator to gain market share in South Africa.”
Nazo supports issuing only one additional license as four operators currently would not be a viable situation in South Africa. As the mobile market further develops into the third-generation GSM (Global System for Mobile communications) era and SA Telkom’s exclusivity monopoly period expires-during 2002-2003-a fourth license could be granted, Nazo said.
Existing cellular operators Vodacom and MTN, with 1.5 million subscribers total, emphatically have said no room exists for another operator and that they are not prepared to share their infrastructure or give concessions to any newcomer. In fact, they are extending their networks at great cost to make any form of competition extremely difficult.
The third entrant would have to have a self-sustaining business case as the failure of a third cellular operator could have disastrous effects on the country’s economy, said MTN’s regulatory executive Michael Stocks.
The South African Regulatory Authority’s (Satra’s) ultimate decision to issue one or two licenses will affect the marketing strategies of the potential bidders.
Thabo Motea, executive director of Afrazone Investments, one of the strong contenders for the license, said: “Only one license is viable. More than one would segment the market and make competition with the fixed operator Telkom, (as well as with) Vodacom and MTN.”
He believes that to facilitate entrance of a third operator, there should be no restriction on technology: “A hybrid of GSM, CDMA and also GMPCS (Global Mobile Personal Communications by Satellite) is the answer,” he added. Afrazone Investments is looking to Northern Telecom Ltd., Qualcomm Inc. and Lucent Technologies Inc. for equipment and “at Iridium as the ultimate solution for GMPCS.”
Nokia Telecommunications, meanwhile, strongly is pitching its dual-band GSM 900 system to enter South Africa’s cellular arena and gain its first foothold in Africa. A major contract in South Africa would open further dealings in neighboring African countries. With the exception of Morocco, Nokia does supply infrastructure in any African country. From a technology point of view, it would also mean the first introduction of GSM 1800 to Africa.
“We are talking to several consortia,” said Jukka Haakana, area general manager for Nokia Telecommunications.
One consortia to which Nokia is pitching is Vula Communications, which together with Thebe and union affiliates have formed a powerful black-empowerment consortium. Telecom Finland, which recently changed its name to Sonera, is gearing up to enter the consortium as a strategic international partner.
Mark Headbush, chief executive officer of Vula, has said his company would spend R6billion (US$1 billion) to build a cellular network if it was granted the license.
Nokia Telecommunications and Vula have obtained a temporary frequency spectrum license for an experimental dual-band GSM trial.
As part of the licensing process, Satra asked for written and oral submission on the economic feasibility of one or more cellular licenses. This followed the release of a consultant’s report Satra commissioned. A total of 30 written submissions were received on 8 May, and 14 companies gave their oral representations at a hearing on 29-30 May. Satra will publish 31 July its findings from these submissions.
Once these findings are gazetted, Satra will allow a short period for public comment and then hand over the final report to the Minister of Telecommunications for approval. The opening date of the bidding process is expected to be the end of September.
The deadline for the rollout of the new network is early 1999.
