SNO Telecommunication (Pty) Ltd is to be known as Neotel, and is South Africa’s second fixed-line telephone operator. It said it would spend ZAR 11bn ($1.52bn) setting up its network over the next 10 years.
Neotel said it would provide international internet connections for commercial customers immediately, however private telephone users will have to wait until March next year before they will be offered services. Corporate clients will be offered wholesale voice and internet services in December.
Neotel’s chief rival is Telkom SA Ltd, which for many years has enjoyed a virtual monopoly in the fixed-line market in South Africa, as well as a 50% holding in the leading domestic mobile operator Vodacom. It dominates the country of 48 million people, where fixed-line penetration rates of only 10% is considered high when compared to other African countries.
The South African government finally issued the second fixed-line telecoms license in December last year, almost four years behind schedule. SNO Telecommunication is a consortium made up of a number of South African and foreign companies, although the South African government in reality remains the largest shareholder with a 30% stake.
This is because it still owns the biggest stakeholders, namely Transtel (the telecoms arm of the South African train utility Transnet) and Esitel (the telecoms arm of the electricity utility Eskom). Both of these companies control the 30% stake. The next biggest shareholder is India’s Tata Group, which has a 26% stake. The remaining stakeholders are the black empowerment group Nexus Connexion with 19%, and lastly Two Consortium and CommuniTel each have a 12.5% stake.
Despite the arrival of a new competitor, Telkom still enjoys a market where it can operate virtually unopposed. Telkom is deeply unpopular domestically because of its high fees and poor levels of service. Even the South African government has urged Telkom to cut tariffs because it is worried that Telkom’s high fees inflates the cost of doing business in South Africa, deters foreign investors, and impedes the roll-out of communications to poor areas of the country.
