Tata to buy 26% stake in S African phone co

JOHANNESBURG: South Africa has approved an application by VSNL, the African arm of India's Tata Group, to buy a 26 percent stake in the second phone operator (SNO) to rival state-controlled Telkom, it said.

The Department of Communications said in a statement: "... the Minister of Communications, Ivy Matsepe-Casaburri, took the decision that VSNL, as part of the Tata Group ... will indeed be allocated the 26 percent equity stake in the second national operator with immediate effect."

Infighting among shareholders and wrangling over who should hold its core stake have delayed the launch of the SNO. Some commentators have accused the government, which owns 37 percent of Telkom, of dragging its feet.

President Thabo Mbeki in his annual state of the nation address said it was unacceptable that some of South Africa's fixed line rates were 10 times higher than those of developed countries.

Mbeki expressed the hope that the problems with the SNO would be resolved soon.

The Department of Communications said Matsepe-Casaburri had urged stakeholders in the SNO to finalize the shareholders agreements and business plan as a matter of urgency so that a licence could be issued at the earliest opportunity.

This month, new rules allowed value-added service network operators (VANS) to offer cheap calls over the Internet, providing the first challenge to Telkom's monopoly.

But analysts say it will take time for the new operators to make inroads into Telkom's market share and that a second fixed-line operator is key to bring down South Africa's sky-high telecom costs.

Tata was the last candidate for the final 26 percent stake after rival Old Mutual Asset Managers pulled out of the race.

The other shareholders in the SNO include Eskom Telecommunications, a division of state-owned power utility Eskom and Transtel, a unit of state-owned transport group Transnet.