South Africa may hang up on Tatas
The South African government may deal a blow to the Tatas’ telecom operations in their country.
By Joji Thomas Philip, TNN |
NEW DELHI: The South African government may deal a blow to the Tatas’ telecom operations in their country. It is seeking to alter the licence conditions of Neotel (the Tatas are the largest share holders in the company with a 51% stake) and wants this company to share its infrastructure with other telcos in South Africa.
The Tatas had in August acquired a 26% stake in InfraCo, a newly set up company, which had bought over telecom fibres of public sector companies like Eskom, Transnet and Transtel, with the objective of making these networks exclusively available for Neotel.
However, the proposed change in Neotel’s licence conditions would mean InfraCo’s infrastructure will be shared by all telecom operators and thus constitute a setback for the Tatas. The Tatas’ stake in both South African telcos — Neotel and InfraCo are routed via VSNL, its international long distance arm.
VSNL’s maiden South Africa venture, Neotel, in which it has already invested $350m, is South Africa’s second national operator and the company launched services on August 31, ’06. The Tatas propose to invest an additional $850m in Neotel.
Industry sources say the rationale behind the Tatas’ forming a JV and acquiring 26% stake in InfraCo ( the remaining stake is held by the SA government) was the bandwidth from this company would be available to Neotel at cost plus 4%. Neotel would thus be able to reduce operational costs and compete with Telkom.
If the licence conditions are changed it will benefit the South African government, which is the largest stake holder in both Telkom and InfraCo, sources added. Currently, the only consolation for Neotel is the South African government has said changes will be made only after consultations with the industry and the public at large.
Additionally, the South African government has also said even under the new regime, Neotel would have guaranteed access to InfraCo’s networks as per its requirements. InfraCo has bought just under 10,000 kms of backbone fibre in South Africa, a significant bulk of which came from three companies.
These include Transnet, the country’s largest transport and logistics company, power supply company Eskom, which had thousands of kilometres of fibre optic cable installed along South Africa’s power lines and Transtel which owned telecom fibre along the country’s railway networks.
The Tatas had in August acquired a 26% stake in InfraCo, a newly set up company, which had bought over telecom fibres of public sector companies like Eskom, Transnet and Transtel, with the objective of making these networks exclusively available for Neotel.
However, the proposed change in Neotel’s licence conditions would mean InfraCo’s infrastructure will be shared by all telecom operators and thus constitute a setback for the Tatas. The Tatas’ stake in both South African telcos — Neotel and InfraCo are routed via VSNL, its international long distance arm.
VSNL’s maiden South Africa venture, Neotel, in which it has already invested $350m, is South Africa’s second national operator and the company launched services on August 31, ’06. The Tatas propose to invest an additional $850m in Neotel.
Industry sources say the rationale behind the Tatas’ forming a JV and acquiring 26% stake in InfraCo ( the remaining stake is held by the SA government) was the bandwidth from this company would be available to Neotel at cost plus 4%. Neotel would thus be able to reduce operational costs and compete with Telkom.
If the licence conditions are changed it will benefit the South African government, which is the largest stake holder in both Telkom and InfraCo, sources added. Currently, the only consolation for Neotel is the South African government has said changes will be made only after consultations with the industry and the public at large.
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Additionally, the South African government has also said even under the new regime, Neotel would have guaranteed access to InfraCo’s networks as per its requirements. InfraCo has bought just under 10,000 kms of backbone fibre in South Africa, a significant bulk of which came from three companies.
These include Transnet, the country’s largest transport and logistics company, power supply company Eskom, which had thousands of kilometres of fibre optic cable installed along South Africa’s power lines and Transtel which owned telecom fibre along the country’s railway networks.
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