Sentech emerges as ‘TNO’

There may be a stalemate over the second national telephone operator (SNO) to rival Telkom — but a third national operator is emerging.

Sentech, the state-owned company previously known as a distributor of television and radio signals, has entered the telecommunications market with its own Internet offering that it says will “break the telephone stranglehold on Internet access”.

This comes hard on the heels of the Independent Communications Authority of South Africa’s (Icasa) rejection of two bids for the 51% foreign equity stake in the SNO.

After being awarded a multimedia licence last year, Sentech is likely to emerge with offerings that may challenge Telkom.

The first was launched last week: an “always-on” high-speed means to access the Internet by satellite — in industry parlance, a bi-directional satellite broadband service.

Broadband is a major trend in the telecoms industry — a faster than dial-up means of being online, usually supplied at a fixed price for an always-on connection.

It is widespread in Europe, the United States and Asia, and is targeted at small businesses and high-end consumers.

Most such services around the world use landlines, like the asymmetrical digital subscriber line service Telkom launched about a year ago that now has about 10 000 users.

Sentech’s first service is VSTAR 512/50, which gives broadband access at speeds of up to 512 kilobits a second. Its bandwidth is shared by no more than 50 customers. It costs R2 999 a month on a three-year contract, with a R3 500 installation fee.

It uses VSAT (very small aperture terminal), a small, fixed satellite dish that receives and broadcasts data to a satellite.

Announcing its plans recently to roll out 100 WiFi hotspots by the end of the year, Telkom also said it was piloting two satellite offerings aimed at the rural and farming markets — one purely for data and another combining data and voice.

Sentech hinted at more powerful offerings than last week’s. Its licence allows it to offer a range of telecommunication services, “with the exception of only plain old voice”, says Sentech CEO Sebiletso Mokone-Matabane.

“VSTAR represents the first of a large family of satellite and terrestrial wireless broadband communication services that Sentech will launch in the coming months.”

Meanwhile, Icasa’s rejection of the bids by CommuniTel and Two Consortium indicates the SNO will not come about this year, and is unlikely to be up and running next year either.

The licence was originally intended to be issued by last May. And even if the licence is awarded, it might not significantly change the telecommunications landscape, some analysts believe.

“Post-SNO incumbents are usually monopolies and remain so for many years,” said Brian Neilson, director of BMI-TechKnowledge, a local research company.

“Just changing the number of players doesn’t change the nature of the market … Special things have to be done in the regulatory framework to make sure that there is competition.”

The government has been looking for a strategic equity partner to take the 51% stake and bring finances and management skills to the equation. It has already granted 49% to parastatals Transet, Easitel (15% each) and empowerment consortium Nexus Connexion (19%).

The Communications Users Association of South Africa said that the real losers were the country’s citizens.

“The economy has been suffering from the ill effects of a long-term communications monopoly. This ‘sometimes on, sometimes off’ SNO process casts serious doubt on the commitment to change and innovation in the industry,” said association spokes- person Ray Webber.

Another analyst, Arthur Goldstuck, MD of technology research organisation World Wide Worx, detected political undercurrents in Icasa’s recommendation.

“Icasa and the Communications Ministry have dropped the ball in a big way. The terms of reference that they have supplied were fully met by CommuniTel.

“The amount of expertise was magnificent. They put together a consortium that any telecoms regulator in the world can only dream of.”

Goldstuck believes Nexus’s recent comments that it could go it alone might have contributed to last week’s announcement. “I think Nexus are the only people who are pleased with this outcome.”

Nexus chairperson Kennedy Memani argued last month that the SNO could be launched without a strategic equity partner and that Nexus could run it, along with the two state-owned enterprises.

“We have enhanced our organisational capacity to contribute to the leadership of the SNO and have arranged, on commercial terms, the support of leading international telecoms experts,” he was quoted as saying on ITWeb.

“It is a perfectly workable solution that will bring competition into the South African fixed-line telephone market without further delay.”

Goldstuck cast doubts on this claim. “Nexus is really a financial consortium put together for black empowerment representation,” he said.

Added Neilson: “Nexus doesn’t have the management skills to compete against Telkom.”

Another industry watcher felt Icasa was correct to dismiss the two bids because “the numbers don’t add up”. The bidder’s business plans would not sufficiently recoup the sale of the state assets and potential revenue, he said.

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