JOHANNESBURG, South Africa-The licensing of two additional cellular carriers in South Africa will represent the biggest opportunity for black empowerment in Africa-and for some, the last chance to become involved in the vibrant telecommunications market here.
When the Department of Communications issues tender invitations later this year, it will bring to fruition the many years of hard work and lobbying by prominent black-empowerment leaders.
The larger consortia vying for the license already have approached banking institutions for financial assistance; not only black empowerment, but sound financial backing will be one of the criteria used by the government in choosing the winning bidders.
“The empowerment initiatives [are] solely in terms of … granting the licenses,” said Mark Headbush, president of the powerful African Telecommunications Forum (ATF). “After that, there are no favors. Building a third and fourth network is a multi-billion dollar project. If service is to be delivered to underserved and non-served areas, a very creative plan is called for.”
Some of the financial resources available to black-empowerment groups is likely to be siphoned off by Cable & Wireless plc (C&W) selling its 25-percent stake in incumbent cellular operator MTN for US$417.7 million. C&W’s interest in MTN will be split between the industrial group Johnnic (18.5 percent) and the parastatal Transnet (6.5 percent).
The sale came as a shock to international carriers keen on partnering with MTN. These included front runner Telia of Sweden, Portugal Telecom and Telecom Italia.
Vice President of Telia Overseas Lennart Broman said, however, that even though he was surprised by the move, it would not affect Telia’s relationship with MTN. The two operators jointly are investigating interests in Kenya, Tanzania and Zimbabwe.
Headbush said he believes there will be sufficient funding available for two new cellular networks. And he is determined that all ATF members will be allowed to be incorporated in the new licenses.
The ATF, founded in 1993, represents more than 450 individuals and businesses and aims to enhance economic development of the African continent by promoting active participation of African entrepreneurs in all sectors of the telecommunications industry. Headbush has been president of the ATF for the past six years.
He says: “I believe that the licenses should be a black-empowerment initiative and will have, as a major requirement, a network and marketing plan that delivers service to underserved and non-served communities-the same communities that are, at present, being ignored by existing networks.”
Headbush also has a stake in Vula Communications, one of the strong bid contenders, but said he is not currently involved with Vula’s cellular interests. Vula is planning to include at least 40 other black-empowerment groups in its consortium.
There are several other groups aligning for the bidding process. These include Kopano Ke Matla, which is the investment arm of the labor union Cosatu, and conglomerate Thebe Investment. The latter initially showed interest in joining forces with Vula, but then decided to take a different route. The Afrozone consortium, aiming to attract numerous smaller black-empowerment groups, and the Telecommunications Empowerment Consortium, led by Mashadu Ramano, also are powerful contestants.
Vender hopes
Creative marketing plans for the consortia already have been drawn up by some vendors that aggressively are attempting to enter the South Africa market for the first time as a base for further expansion in Africa. These are Lucent Technologies Inc., Nokia, Northern Telecom Ltd. and Qualcomm Inc.
Nokia has provided training, marketing strategies and even chosen the equipment sites for the Vula consortium it is nurturing. The vendor is promising pricing deals and offering attractive incentives for potential operators. Nokia is punting GSM (Global System for Mobile communications) 1800 MHz technology.
The government has not released frequency and standards specifications, but industry leaders believe the two new operators both will use the 1800 MHz frequency band.
The incumbent cellular operators, Vodacom and MTN, currently operate on GSM 900 MHz networks and are not taking this possibility too lightly as they see it as an erosion of their market share. The sensitive issue of sharing infrastructure with the newcomers already has provoked a war of words.
But if the transition of the GSM 1800 standard from a rival technology to a partner technology eventually evolves, the advantages of roaming and dual-band handsets would benefit not only South Africa, but the rest of Africa, which is awaiting anxiously the outcome of the contest.
GSM 900/GSM 1800 may not be the only technology solution for South Africa, however, and certain vendors including Qualcomm and Motorola Inc. are lobbying for the introduction of CDMA (Code Division Multiple Access). In a strongly worded letter to the South African and U.S. governments, Qualcomm Regional Vice President for Africa Charles Oshunremi complained the frequencies for CDMA had not been allocated and that the technology has been “left out in the cold.”
In Africa, CDMA technology has been deployed in Zambia and the Democratic Republic of Congo.
International carriers wishing to offer their expertise to the local newly formed black-empowerment consortia patiently are waiting in the wings for the tender document. The contents of the document will determine major factors such as percentage of ownership stake and control, and whether their investments will be worthwhile.
Some companies, including British Telecommunications plc, dropped out of the contest when the announcement was made that two, not one, additional cellular licenses would be awarded. Five international operators still are confident they could invest successfully in South Africa: AT&T Corp., Bell Canada International, GTE Corp. of the United States, Portugal Telecom and Sonera (formerly Telecom Finland).
