21 March 2001
It is my pleasure to welcome analysts to this briefing session on the telecommunications policy and its impact on the Telkom IPO. The gazetting of the draft telecoms policy on Friday last week represents an important milestone in our managed liberalisation of the telecoms sector, and indeed a critical milestone in the process of listing of Telkom. It is hoped that this session would afford you the opportunity to obtain a better understanding of the rationale that informed our various policy positions in this sector.
In his state of the nation address in February of this year, President Mbeki highlighted the telecoms sector as a key input sector which is likely to serve as a catalyst for growth in other key sectors of our economy. In pursuit of the need to enhance our manufacturing competitiveness, telecommunications represents an important element of the overall manufacturing logistics chain. Hence, the promotion of competition in the telecoms industry is aimed at reducing the cost of doing business in South Africa. Furthermore, this sector should not only be seen as an input sector in our economy, but also as a growth sector in its own right, with a tremendous potential of integrating the Sub-Sahara African economy.
Our objectives in pursuing this managed liberalisation strategy are three fold. In the first instance, as I have stated previously, it is aimed at promoting greater competition, thereby ensuring a cheaper and reliable telecoms service to South African citizens and businesses in South Africa. Secondly, it is aimed at ensuring that we move our teledensity from the current 19% to orders of magnitude of 70-80%. Thirdly, it provides us with an opportunity of promoting domestic ownership, in particular ownership by black people, in a sector that is not only critical to the South African economy, but is also earmarked for significant growth.
Our managed liberalisation approach is, therefore, intended to ensure that competition is introduced in a responsible manner, both at a facilities or infrastructure level and also at a service based level. A shift to immediate service based competition, without ensuring competition at an infrastructure level would have negated our stated objective of ensuring wide ranging coverage thereby increasing teledensity. The introduction of an additional infrastructure based competitor, does not preclude the introduction of further competition but rather reflects our position at this juncture, based on a careful analysis of the absorptive capacity of the market.
Prior to the Director-General of the Department of Communications outlining the technical elements of the policy, I believe it would be important for me to focus on a few elements of the policy that have a bearing on SOE restructuring and on the Telkom IPO. The inclusion of Eskom and Transtel in the SNO has been informed by a careful analysis of international best practice, and our desire to offer existing telecommunications infrastructure to the SNO process. This in our view will see a rapid roll-out of telecommunications infrastructure, thereby ensuring meaningful competition at an infrastructure level within the shortest possible time. You will note that we have put a three-year cap on the SNO for infrastructure rollout. This is an aggressive time line and would not be possible if we do not offer existing telecommunications infrastructure to the process.
A further issue that I would like to comment on, is the 49% cap on foreign ownership. This implies that we are desirous of ensuring 51% domestic ownership. Domestic ownership should not be read as being synonymous with state ownership. This position on ownership is typical of most countries, both in the developed and developing world, the USA included. The primary motivator for us adopting this approach, is that we must create an opportunity to stimulate the participation for the investment of domestic capital in an under invested sector with tremendous growth potential, whilst creating sufficient space for foreign based companies to participate. This model also creates an opportunity for appropriate partnerships to evolve between domestic and foreign telecoms companies, thereby creating an opportunity for technology diffusion in a key sector of our economy.
It is within this context, that I believe that we have provided policy certainty for the listing of Telkom scheduled for the fourth quarter of this year. Via this policy, we have once again demonstrated governments ability to consider a range of issues and objectives which at face-value appear to be contradictory, and emerge with a policy framework that commits to a competitive environment, whilst ensuring that our existing assets and capabilities contribute to this competitive environment.
In conclusion, I trust that you find the Q&A session that follows Andile Ncgaba's presentation extremely useful. Let me also offer my commitment that this mode of interaction and transparency will take place during all the critical milestones in the restructuring programme, including the Telkom IPO.
I thank you