LET`S HOPE Dr Ivy Matsepe-Casaburri, Minister of Communications, has tidied her desk and cleared her diary. Let`s hope Dr Ivy Matsepe-Casaburri, Minister of Communications, has tidied her desk and cleared her diary.

She needs the space for the stacks of files due to arrive any moment now from the office of Karl Socikwa, CEO of Transtel and chairman of the steering committee of South Africa`s second network operator.

"It`s in volumes," says Socikwa, referring to the business plan that the SNO steering committee has put together so it can claim its licence and end the three-year wait for an alternative to Telkom.

The SNO`s bulky delivery, consisting of the business plan, shareholders agreement and integration plan, will be sent to the Minister`s office in Pretoria in "a matter of days", Socikwa says. As soon as the ink of her signature dries, the pack will be whisked off to Icasa, the Independent Communications Authority of South Africa, for the final step in the licensing process.

"We anticipate Icasa will take three to four weeks to issue the SNO licence," says Socikwa, who isn`t even entertaining the possibility of delays.

"Yes, we have lost time and opportunity but recently we have seen significant progress. We are now focused on what lies ahead and have written off the past as a learning experience. We`re still very bullish about the opportunities in the market for the SNO and through the SNO."

If Socikwa`s confidence is vindicated, and the SNO gets its licence by the end of July or first week in August, the consortium will immediately gear up to "light up the fibres".

He says the SNO plans to launch the business as soon as six to nine months after receiving its licence. "We`re talking Q4 2005 or Q1 2006."

Although six to nine months to launch a new national operator (which will have a real name instead of its current acronym) seems ambitious, Socikwa is adamant it will happen.

"Our backbone network has already been built and we will be launching the business off our own core infrastructure. We took a gamble but it`s going to pay off."

This gamble was the decision by Transtel and Eskom`s Esitel, which have a 30% shareholding in the SNO, to start building the network as early as in 2002, at a cost of between R1.5 billion and R1.6 billion.

"If we had waited, it would have taken 18 to 24 months after the issuing of the licence to get the infrastrastructure ready for the business launch," says Socikwa. "Instead, because we took the right decision early, we`re doing it in a third of the time. Time-to-market is currency in this business."

But how will it work?

The SNO`s core infrastructure is an optic fibre backbone that covers all the major metropolitan centres, from the usual suspects such as Cape Town, Johannesburg, Pretoria, Durban and Bloemfontein to less glamorous, but equally important, towns and cities like Kimberley, Richards Bay, Pietermaritzburg and Mossel Bay. "Because of the railway routes and electricity grid, deployment was easy," says Socikwa. "We just strung the fibre along the electricity grid and railway lines and used our existing telecommunications high sites and buildings to install the transmission, switching and routing gear."

He says the network has self-healing fibre rings to ensure alternative routing in the event of a break, and is based on Internet Protocol (IP) technology.

"It`s a next generation network which supports Voice over IP and services like IPTV and, most importantly, it has no legacy. The SNO is going into the market without legacy, which means we can get straight to the point." Which is? "Providing world-class services on leading-edge technology," Socikwa says.

With the SNO`s core network already in place, it could technically (albeit not legally until it has its licence in hand) provide certain services immediately.

"If a wholesaler wanted to take dark fibre from Cape Town to Johannesburg, we could do it on the optical fibre cable backbone," he says. "But we still need to deploy the access network, which will take six to nine months to complete."

Tying up loose ends

With the SNO`s core network already in place, the months in the run-up to the business launch will be spent hiring staff, deploying the access network, putting support and distribution systems in place, and dealing with one or two regulatory matters that have yet to be settled.

According to Socikwa, the most burning issue is gaining access to Telkom`s local loop (the "last mile" to customers` homes and offices) and to its undersea cable infrastructure.

"We will need access to both so as to be able to compete with the incumbent. Unbundling of the local loop is still unresolved and we are going to push hard for it."

The reason why the SNO wants access to the local loop is that it will not just be targeting business and wholesale customers. "We also want to give choices to residential customers," he says.

According to Socikwa, the new operator plans to target "all customer segments, although obviously not all in one go from day one." In its sights are the carrier-of-carrier, wholesale, business and residential customer markets.

As a carrier of carriers, the SNO aims to provide transmission links to the mobile operators, Under Serviced Area Licencees and Sentech, "should they require it". In the wholesale market, it will offer bulk bandwidth to value added network operators (VANS) and ISPs.

In the business market, it will be targeting everyone, "from the top corporates all the way down to small businesses". In the residential market, both high- and low-end customers will be in its sights.

"We have an interesting mix of products in mind," Socikwa says. "In the residential market, for example, we`ll look at bundling some voice with data and the Internet. In this market, we`ll be able to benefit from the experience of VSNL, our equity partner from India. They have strong experience in the lower end residential and second economy, and we will be looking at what we can borrow from them."

Cautiously optimistic

For the time being, though, Socikwa`s not prepared to say much more about the SNO`s plans.

"Our business plan is going to feature with Icasa and is not available for public consumption right now. If you have it flying all over the place, it could fall into the wrong hands."

Does he honestly believe, though, that the SNO`s plans to target all customer segments can succeed?

"Yes," says Socikwa. "We`ve done extensive research into different parts of the market and on the most appropriate services and technology to deploy."

He elaborates: "Overall, penetration in South Africa is about 13% in total and less than two per cent in some rural areas. The second economy doesn`t even have a `first` network operator and, even in affluent areas where penetration is more than 100%, there will be demand for an alternative to the incumbent. The whole market is waiting in anticipation for an alternative, so there are major opportunities for the SNO. Costs are high and they come down with competition."

SNO strengths

He also believes that the SNO has several strengths that will smooth its way into the market, particularly its lack of legacy infrastructure and mix of shareholders. "VSNL is an operator. Nexus has a very broad base. Transtel has the infrastructure, including access to rights of way, ports and airlines, and over the years has built many mutually beneficial business partnerships in the market. Eskom is a national utility. If you use electricity, you have a relationship with Eskom, which can be leveraged for the SNO."

This diverse combination of shareholders has "gelled well", says Socikwa. Each player had originally compiled their own business plan, which then had to be pulled together into one consolidated business plan. "When we put them together, we found we were all working off the same type of information. It had to be tweaked here and there, but it gelled."

...And weaknesses

He concedes that the SNO has some disadvantages, too.

"Currently, we don`t have relationships with the universe of customers that the incumbent has. We are going to have to prove ourselves and build relationships to overcome that fairly quickly,` observes Socikwa.

He elaborates: "The regulatory environment is going to be crucial because we are going into a market where the incumbent has significant market power. The incumbent is the incumbent and there is a tendency among incumbents to abuse their market power. We will need to work closely with the regulator to make sure there is fair competition."

What the SNO doesn`t see as a potential obstacle is the heightened pace of competition being introduced into the communications sector.

"We believe further liberalisation of the market should continue as managed liberalisation, with the SNO being given the opportunity to establish itself and make the impression it should," Socikwa concludes.