Neotel sale caps blunders

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For a process that began in 2001 to bring competition to Telkom’s then fixed-line monopoly – with a licence for the Second National Operator (SNO) – the sale last week of Neotel concludes what has been a spectacular failure of government policy. It is also an indictment on the incompetence of the numerous communications ministers – barring the brief efficiency of Yunus Carrim – whose bungling has cost the country untold billions in overpriced telecoms and lost opportunities.

The only travesties to compare in scope are the long drawn-out spectrum reallocation for digital terrestrial television (DTT) – with its related encryption of set-top boxes court cases – and the horror show that is Hlaudi Motsoeneng’s censorship and otherwise undermining of the public broadcaster’s mandate.

The SNO was supposed to bring greater competition to South Africa’s telecoms landscape where Telkom, which was then a rampant abuser of its state-sanctioned monopoly, had the country over a barrel with overpriced voice calls and appalling internet offerings.

Neotel was cobbled together from the telecoms assets of Eskom and Transnet; the two competing bidders (Two Consortium and Communitel); the State, and BEE partner Nexus Connexion.

The bidding process was so fraught that then Communications Minister Dr Ivy Matsepe-Casaburri selected both Two Consortium and Communitel and gave them 13% each instead of the original 26% they were bidding for. The consortiums – whose bids were both criticised by a feasibility study – included, respectively, Tokyo Sexwale’s Mvelaphanda Holdings and the Umkhonto We Sizwe Military Veterans Association. It was a clash of political interests over telecoms necessity long before the licence was even granted. As the eventual outcome would reveal, it was a compromised process in almost every regard.

The long-delayed licencing process – bidding had begun in early 2002, the winners were announced in December 2003 but only finalised in August 2005 – meant Neotel, as it would be named, had arrived long after its original purpose (to compete in landline voice calls) was effectively obsolete. By the time Neotel unveiled its orange corporate colours and its head office in Midrand, fixed-to-mobile substitution (or the move from landlines to cellphones) was in full swing.

India’s Tata Communications would become the majority shareholder, and must be relieved to be exiting.

Every new twist in this contorted saga was dealt with by each subsequent communications minister with further incompetence and a clear lack of understanding of the importance of telecoms and internet access in this new age of connectivity and the rise of the knowledge economy.

Matsepe-Casaburri’s dogmatic protectionism of Telkom – which has finally shown signs of life and competiveness under new CEO Sipho Maseko – seemed like a low point for the Department of Mis-Communcations, as the tech and telecoms industry jokingly call it.

That was until Communications Minister Faith Muthambi’s error-ridden tenure began, where she unravelled the good work done by Carrim on the set-top boxes required for DTT, even going against her own party’s policy. South Africa is now a year past the June 2015 deadline to switch over, and free up that useful spectrum – known as the digital dividend – for cellular operators who can better make use of it for wireless broadband. Seeking Neotel’s rich vein of this spectrum, Vodacom in March walked away from a R7bn offer it made in May 2014, after competition authorities dragged their heels.

Muthambi has continued her slide into ignominy with her shielding of intellectual simpleton Motsoeneng – the Homer Simpson of broadcasting and the Nigel Farage of dumbing down debate – and his censorship of news, his illiterate and nonsensical explanations for this and his destruction of the SABC’s public broadcaster mandate.

Neotel will now be sold for R6.5bn to Liquid Telecom – a subsidiary of Econet Wireless which is headquartered in Mauritius, and is the brainchild of controversial Zimbabwean entrepreneur Strive Masiyiwa – and will be part of a pan-African broadband network.

The rest of Africa will benefit more from what should have been a South African success story, all thanks to a series of clueless party hacks whose job as communications minister have served narrow interests instead of the voting populace.

This column first appeared in Financial Mail

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About Author

Toby Shapshak is editor-in-chief and publisher of Stuff, a Forbes contributor and a Financial Mail columnist. He has been writing about technology and the internet for 20 years and his TED Global talk on innovation in Africa has over 1,5-million views. He has written about Africa's tech and start-up ecosystem for Forbes, CNN and The Guardian in London. He was named in GQ's top 30 men in media and the Mail & Guardian newspaper's influential young South Africans. He has been featured in the New York Times. GQ said he "has become the most high-profile technology journalist in the country" while the M&G wrote: "Toby Shapshak is all things tech... he reigns supreme as the major talking head for everything and anything tech."

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