Several investors in the Second National Operator (SNO) appear to be hedging their bets, using the Elephant Consortium to buy into Telkom, the monopoly service provider with which the SNO was designed to compete.
Their involvement raises new competition concerns, and may cast more doubt on the future of the SNO, which is fraught with shareholder struggles, and uncertainties over licensing.
Jim Myers, who is listed by Elephant as one of its shareholders, is a director of, and shareholder in, Nexus Connexion, which owns 19% of the SNO.
And Africa Venture Partners (AVP), a Johannesburg investment firm run largely by expatriate Americans, confirmed on Thursday that it has a 12% stake in the ”Buffalo” component of Elephant. It also has a history of involvement in the SNO.
According to papers filed with the Independent Communications Authority of South Africa (Icasa) last year the firm is a provider of funding to the TWO consortium, which was controversially awarded a share in the second operator by Minister of Communications Ivy Matsepe-Casaburri.
Nexus is currently embroiled in a legal dispute over that decision. Matsepe-Casaburri split a 25% strategic equity stake between TWO and Communitel, overriding objections from Icasa about weak funding and opaque shareholding.
The lawsuit caps a prolonged battle over what Nexus says are improper attempts by TWO and Communitel to gain control of the SNO.
Nexus CEO Kennedy Memani did not respond to requests for comment.
Industry insiders, however, say it seems increasingly unlikely that the company will ever take off in its current form, and many blame Elephant front man Andile Ngcaba, who was instrumental in creating the structure of the SNO, for ”setting it up to fail”.
AVP’s Colin Clarke denies any conflict of interests. He says the company is involved in Elephant because of its expertise in telecommunications. The decision to fund the SNO was taken ”some time ago”, he said.
”I am not sure, but I think that deal has since fallen through, given everything that has happened to the SNO,” he said.
Mpofu and Serobe have a more arms-length interest in the success of an alternative to Telkom. Mpofu is chair of Aberdare cables, an empowerment subsidiary of electronics group Altron, while Wiphold owns 20% of ABB Powertech, another member of the Altron group. Serobe sits on its board.
Both companies are supplying products and services to parastatal shareholders in the SNO as they begin to build its network, but Mpofu says there is no conflict in owning Telkom shares and supplying its would-be competitor: ”Aberdare stands to gain from Telkom, from the SNO, from anyone that is rolling out that kind of network.”
Industry sources said, however, that the clustering of individuals within Elephant and companies involved in the SNO raises serious competition concerns.
But more than one speculated that the presence of people associated with bitter rivals like TWO and Nexus in a consortium assembled by Ngonyama signalled that some in government are looking for a way to compensate them ahead of a drastic restructuring of the SNO, which may lead to its current investors losing out.
Icasa chairperson Mandla Langa told the Mail & Guardian that the regulator still did not have enough information to establish the bona fides of current shareholders in the second operator.
Asked whether the structure of the Telkom deal might suggest the imminent re-organisation of the SNO, he said. ”There certainly will be a need for some very creative thinking on the part of just about everyone involved to ensure that the SNO attracts the very substantial investment it needs.”