Mergers, Acquisitions and Financial Results

A report released on Tuesday last week by the Independent Communications Authority of SA (Icasa) raised grave doubts about the viability of either of the shortlisted bids for the second telecommunications network operator.

The authors of the report, Next Generation Consultants (NGC), found both Two Consortium and Communitel’s bids were "highly contingent on a number of issues, which therefore makes them non-binding offers". In addition, the report accused the two bidders of ignoring draft license provisions and found both bids financially deficient.

In January this year, Icasa recommended that two previous final bids by Goldleaf Trading and Optis Telecommunications be rejected for similar reasons. The process was then re-opened for bids, with much fanfare, in late March. Two Consortium and Communitel are competing for a 51 percent controlling stake in the entity that will finally be awarded a licence.

The report was released by Icasa chairman Mandla Langa at a short media briefing at the regulator’s Johannesburg offices on Tuesday. The report also foresaw trouble between the winning bidder and the minority stakeholders that would require mediation and resolution before the granting of any license.

Eskom Telecommunications, Eskom Enterprises, and Transtel hold a guaranteed 30 percent stake in the SNO and black economic empowerment company Nexus Connexion holds the remaining 19 percent. The bidders, their partners and the public at large was given a week to comment on the report. Langa indicated Icasa would make its choice of bidder known to communications minister Ivy Matsepe-Casaburri on August 28.

Neither Two Consortium and Communitel could comment on Tuesday on the report, as they had first sight of it at the same time as the media. Langa told journalists that the consultants’ mandate had been to analyse but not evaluate the applications. The applications were not scored or compared with each other nor was any recommendation made to Icasa.

"The function of evaluating, scoring, weighting and making a recommendation to the minister is a function that, in line with the Telecommunications Act, will be undertaken by the three councillors of Icasa enjoined with this task," he said. The councillors are Langa, Lumko Mtimde and Julia Hope.

South African Press Association