Johannesburg - Government's intention to launch its own company to provide telecommunications infrastructure to the Second Network Operator (SNO) has been applauded by analysts, saying it will bring down costs.
The analysts said although the move entrenches government's involvement in the sector, it was positive.
SNO Telecommunications Ltd will become the first challenger to government-controlled Telkom's (TKG) monopoly on fixed line operations.
Government would not give details about the proposed infrastructure company and its impact on the SNO on Friday.
Department of Public Enterprises spokesperson Gaynor Kast said: "We will make a detailed announcement at the appropriate time. Any comment at this stage would be premature and would jeopardise current negotiations.
"We wish to reiterate that we are confident that the outcome of the negotiations will be in the best interest of the SNO and its launch, which is expected in the near future."
Ajay Pandey, SNO managing director, said they will make an announcement regarding their relationship with the proposed company this week.
Pandey on Friday issued invitations to the company's launch, scheduled for August 31. It is believed that the company has decided on its name and has asked branding company Enterprise IG to work on its corporate identity.
Pandey said the company would use the launch of its corporate indentity to also unveil its international wholesale switch services. He said this would be followed in December by a roll-out of enterprise services.
Pandey said consumer services would be available in January.
Sources close to the developments said the business plan of the company includes the building and upgrading of facilities for long-distance national and international calls, with the SNO responsible for city and town connections.
The proposal is said to include having a partnership with the SNO for at least five years. Ownership of the company is expected to be split. Government will have 74% and 26% will be owned by Videsh Sanchar Nigam Limited (VSNL), a 25% shareholder in the SNO.
Projections show the company will need R2.2bn over the first three years to finance its operations. Government is expected to contribute R1.1bn and VSNL R398m.
SMME Forum president Tebogo Khaas was wary of government diversifying and reallocating its resources. He said the objective should be for government to divest itself from being a player, both as a direct shareholder and indirectly in the sector.
Government has a direct shareholding in Telkom, which also has a 50% shareholding in mobile cellular provider Vodacom. It also has an indirect interest in MTN, owned through companies and funds such as Transnet and the National Empowerment Fund.
Khaas hoped the proposed infrastructure company would help the SNO roll out its services quickly and cheaply once it came into operation.
"It will be in the interest of the country to have a strong SNO," Khaas said, but he lamented the delays in the launch, saying it was bad for consumers and small business.
Denis Smit, BMI-TechKnowledge managing director, said the infrastructure company was consistent with government's approach to play a leading role in infrastructure provision.
Smit said this appeared to complicate the situation in that it entrenched government's involvement in the economy and would have a huge impact on pricing.
He said BMI-T believed the SNO would manage to capture at least 15% of the telecommunications market over the next four years.
The SNO this week bought assets from Transnet in a deal valued at R256m. The assets include high capacity fibre optic networks and facilities located in major metropolitan areas.