Neotel’s Presentation on Electronic Communications Amendment Bill

1. Neotel’s Presentation to the Portfolio Committee on Communications on the Draft Electronic Communications Amendment Bill GG NO 3030701st November 2007

2. Structure of Presentation • Introduction • Policy Framework of ECA • Infraco Bill • Ministerial Directive • ICASA’s Licensing Powers • Lack of Certainty • Creation of parallel Licensing Regime • Under-Sea Cables • Conclusion • Q&A Session

3. Introduction • Notice issued on the 17th September 2007 • Objective of the proposed amendment • Impact on Neotel - erodes business case - delay in roll-out - Impact on competition • Purpose of Legislative Enactments- repeal of Telecommunications Act, Promulgation of ECA

4. Policy Framework of ECA • Publication of White Paper • Adopt a Process of Managed Liberalisation • Telecoms Act - was the basis for reform - provided for Licensing of SNO • ECA – progressive liberalisation of the Communications sector • Objective of the proposed amendment- reduce costs of telecommunications; • Universal Service and Access • Improving Government Service Delivery

5. The Infraco Bill • To facilitate the Licensing of Infraco • Further state owned Telecommunications service provider- is this consistent within the context of Government’s policy towards a liberalised & competitive sector • Concept of “Public Entities”- is it intended to facilitate the licensing of Municipalities • Provisions of section 5(d) of ECA- “state entity. ownership interest of greater than 25% of share capital…” • Licensing is adequately dealt with by ECA

6. Policy Digression • Creation of SNO Licensing Structure SNO (NEOTEL) SEPCo 51% SOECo 30% Eskom Transnet BEE 19% Nexus Connection

7. Policy Digression • SOE’s contribution to shareholding • Effect of the contribution • Enabling Neotel to obtain time - to - market • Introducing effective competition-ability to compete effectively • New products and services • Neotel not prepared to counter policy change • Delay in roll-out- no long distance network

8. Ministerial Directive • Current state participation in Licenced operators-Telkom, Vodacom, Neotel - has this had a positive impact on the licensees ability to perform in the market place • Sec 3(2) of ECA – permits Minister to issue policy directives consistent with ECA - relate only to enquiries, determination of priorities and consideration of matters within ICASA’s jurisdiction, placed before the Minister • Does not cover the ambit of granting, amending, transfer, renewal, suspension or revocation of Licence • The amendment seeks to confer on the Minister this power to make such policy directions.

9. ICASA’s Licensing Powers • The licence sought is an individual licence • Infraco requires such a licence to Operate and to sell ECN services on a RETAIL OR WHOLESALE basis • Needs to await the issue of an ITA by ICASA • ITA needs to concisely stipulate the qualifying criteria • Infraco need to comply with each of the criteria before it can obtain a licence • What if it does not satisfy this criteria - Can ICASA refuse to issue a licence?

10. Lack of Certainty • Power to be conferred on the Minister is vague • Could intervene or make any policy directions “to ensure strategic ICT infrastructure development” • A delegated discretionary power- should not be so broad to the extent that it does not define the nature and scope of the power conferred • This could lead to arbitrary exercise of the delegated power • As drafted currently the power to the Minister is so broad that there is no limit to the steps which ICASA could be directed to take

11. Creating a Parallel licensing Regime • Amendment creates a separate licensing regime for “public entities” to the disadvantage of private operators • No basis in the ECA for licensing procedures to be different • Objective of the ECA is to eliminate differences and preferential treatment • Sentech, Telkom and SABC are also “Public Entities”- they can be licensed on a separate basis in terms of this policy directive • What is the scope of the definition of a “public Entity”

12. Under-Sea Cables vs Infraco • Infraco to be part of the Nepad broadband initiative to link Africa with Latin America & Europe • Ministerial intervention on private cable development initiatives • Impact of such intervention - Foreign direct investment/investor confidence

13. Recommendations • Infraco may not have a preferential licensing regime-has to follow process set out in sec 5 of ECA • Will have to apply for an individual licence pursuant to an ITA • ITA to stipulate criteria to be complied with • Criteria to include technical, financial and empowerment criteria to be evaluated • Publish draft terms and conditions that will be applicable to the licensee • ICASA is required to give notice of the application (sec 9) • Allow for public representations-in the interest of transparency and non-discrimination

14. Conclusions • Further state-owned operator unlikely to achieve the desired objectives • Establishment of Infraco militates against competition-undermines Neotel’s efforts t establish itself as a viable competitor • The amendment is far to vague, broad and uncertain- impacts on investor confidence • Blurs the distinct roles of executive and legislative branches of government • Creation of a separate licensing regime for “Public Entities”

15. THANK YOU

16. QUESTIONS AND ANSWERS SESSION