JOHANNESBURG, South Africa-The many delays that have beset South Africa’s third mobile network license process could be at an end. In February, the Minister of Communications Dr. Ivy Matsepe-Casaburri announced the winner was the Saudi Oger-financed Cell C consortium, despite the fact that a judicial review of the process remains under way.
Reading a short statement, the minister said, “In terms of section 36 of the act, I herby conditionally grant the third cellular telecommunications license to Cell C. I know there is a judicial review. I have filed my affidavit in reply.”
The announcement was made just two days ahead of South African President Thabo Mbeki’s planned visit of Saudi Arabia. Government officials denied any link between the announcement and the visit.
The minister expressed confidence that the court would not find any substantial irregularities in the award process and that she was free to issue the license, as rival bidder NextCom had ceased its legal action. The judicial review, based on NextCom’s original complaint, is to be decided in May.
A spokesman for Cell C said, “The award brings to an end a period of uncertainty that has been clouded by unwarranted delays.”
The license conditions mentioned by Dr. Matsepe-Casaburri are that the consortium is to adhere to its commitment to ensure a 40-percent equity stake for black empowerment partners and the compliance of providing 52,000 connections to the underserviced, mostly rural areas of the country.
Analysts maintain the delays will make it difficult for the winning consortium to forge a credible business plan, as the postponements will hamper the technology rollout and drive to acquire subscribers.
Talaat Laham, chief executive officer (CEO) of Cell C, said that despite the fact the delays have dearly cost his consortium, he remains confident the license is still viable. The operator will spend about US$600 million on network infrastructure with plans to have it up and running by December 2001.
The delays began when some of the bidding consortia accused the then regulator, South African Telecommunications Regulatory Authority (SATRA), of bias and alleged government interference in the selection process through which SATRA first selected Cell C for the license last year. NextCom, backed by Hong Kong-based Distacom, challenged the decision and won a court order preventing the minister from announcing whether or not she agreed with the regulator’s recommendations. NextCom withdrew the interdict in September 2000 with the judicial review of the process remaining.
SATRA has now become the Independent Communications Authority of South Africa (ICASA).
A mere two hours after the recent announcement, NextCom CEO Bushy Kelobonye told reporters he was shocked by the minister’s statement, and his consortium would challenge the decision in court as it was based on a flawed recommendation.
Kelobonye said, “Despite the decision we intend going ahead with the judicial review of the regulator’s earlier recommendation. We are resolved to find all the answers why Cell C was recommended despite irregularities in the process and the serious flaws in the bid.”
Incumbent mobile network operators Vodacom and Mobile Telephone Networks (MTN) hope that granting the third mobile network license in South Africa will speed up the allocation of additional capacity in the GSM 1800 MHz band.
Joan Joffe, Vodacom’s group executive for corporate affairs, said the entry of a new player would generate welcome competition and give confidence to potential foreign investors. Joffe added the decision reflected a positive sign the Department of Communications, to which ICASA makes recommendations, is serious about developing a clear, decisive policy framework on telecommunications, referring to the country’s 1800 MHz spectrum. The 1800 MHz frequencies have been in a state of limbo due to the lack of clear policy on which licensees should have access to the spectrum and the controversy surrounding the third license award.
The third mobile license debacle in South Africa could be at an end, but industry analysts said if the judicial review does find flaws in the process, the decision would be overturned, which could translate to egg on Dr. Matsepe-Casaburri’s face.
