SA’S ESKOM TO CUT ITS LOSSES ON TELECOMS

Telecoms

The long-awaited announcement from South Africa’s power utility Eskom that it will get out of telecoms was made during the presentation of its financial results last week. It will sell its 15% interest in the SNO and its shareholding in the company that owns Lesotho’s incumbent telco. The latter will be given on a first refusal basis to Econet Wireless.

Eskom said during the presentation of its 2005-6 financial results last week that it was in the process of selling the fibre-optic cables that it had deployed in preparation for its involvement in the second network operator (SNO).

"The intended sale of the Eskom portion of the full service network is in progress," said Eskom CEO Thulani Gcabashe.

He said delays in negotiating the asset sale had prompted the parastatal to take a conservative view and leave the full impairment provision of R760m against this investment.

In 2003 Eskom said it had invested R748m in establishing a full service network infrastructure to prepare for its participation in the SNO. Delays in launching the SNO at the time led to Eskom impairing R649m on this investment.

The sale of Eskom's network infrastructure follows shortly after Transnet announced that it had sold its fibre-optic cables to the SNO for R256m. Both Eskom and Transnet own 15% each of the second phone operator. Analysts said it was only a matter of time before the two companies sold their interests in the new Telkom rival.

SNO MD Ajay Pandey, said recently that the availability of the fibre-optic network to the newcomer would facilitate the early roll out of enterprise and consumer services across the major cities, as contemplated. "We are in discussion with various potential customers and are now in advanced stages of readiness to deliver," Pandey said. The SNO, which was granted a 25-year operating licence last December, said it would roll out its services in phases.

Corporate customers would be first in line to get the services of the new entrant, while domestic customers would be connected in the first quarter of next year.

Investment bank Merrill Lynch has predicted that the second network operator could take about 2.5% of Telkom's market by next year. This was down from the 4% gain predicted earlier. Telkom estimated it could lose up to 15% of its market if government and some big companies chose to defect to the SNO.

The Independent Communications Authority of SA said the licence conditions of the new phone operator would largely be the same as those of Telkom. But whereas Telkom's operating licence requires it to provide a service to "every person in SA who requests it", the second operator was obliged only to provide services to the 14 network service areas. These are the municipalities of Johannesburg, Tshwane, Mangaung, Cape Town, Mogale City, Ethekwini, Nelson Mandela Metropolitan, Buffalo City, Mafikeng, Mbombela, Polokwane, Sol Plaatjie, Msunduzi and Ekurhuleni.

The second operator was also required to ensure availability of services to 50% of the population within the 14 network areas in the next five years. It also had to ensure that 80% of the entire South African population could access its services after 10 years. Other licence conditions include providing high-speed internet connectivity to at least 2500 schools and 2500 rural clinics.

Business Day