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Hi Jeff and all

+-----Original Message-----
+From: African Network of IT Experts and Professionals (ANITEP) List
+[mailto:[log in to unmask]]On Behalf Of Jeffrey Cochrane
+Sent: Sunday, October 17, 1999 4:37 AM
+To: [log in to unmask]
+Subject: Re: State of the Continent: ICT
+
+
+Greetings Afrik-ITes!
+
+There's an annoying bug in the latest Pegasus Mail.  I've spent the
+last week demonstrating to myself how it works -- my massive
+email filing system simply disappeared, but fortunately it was
+merely the indexing system that collapsed.  The files themselves
+were (tediously) recoverable from disk...  If anyone needs a lesson,
+let me know.  I now consider myself an expert on the hierarch.pm
+file -- I strongly urge you to back it up each time you add a folder or
+tray in the latest Pegasus, as it reportedly corrupts easily.
+

Ive just about stopped using Pegasus and now use Oitlook while I wait for
Groupwise to be installed. PMail just became too problamatic .


+Thanks to Henry for that absolutely superb comment.  Just so I
+understand properly, a few clarifying questions...
+
+On 13 Oct 99, at 10:14, Henry Watermeyer wrote:
+
+> With the privataisation of the telco into TELKOM SA, with
+> shareholdings by the South West Bell Corporation of the USA and
+> Malaysia Telecom, we now see the financial statements of TELKOM.
+> These reflect significant profits over and above the investement
+> being made in expanding and upgrading the network prior to
+> deregulation in about three years.
+
+Fascinating!  Can these financial statements be shared?  I wouldn't
+mind having a copy, which I could then summarize for Afrik-IT.  Up

They are, or were last time I looked, on WWW.TELKOM.CO.ZA and are published
every six months.

+to now most have simply speculated on the cost-price divide based
+on estimation of costs.  Would be nice to have some solid data,
+even if generalizing from South Africa to the rest of the continent
+can be perilous.

Definately needs to be done with care.

+
+> What the US donors, including the largest individual shareholder
+in SBC, are
+> saying is that it must be possible for the reseasrch & education
+sector, in
+> our specific case, to be charged at a more affordable, by which they mean
+> sustainable, level so that the projects they fund do not end up
+struggling
+> while we see large profits for the telco. (They also object to
+paying Value
+> Added Tax on the spending associated with their funding but thats another
+> story)
+
+You are saying there is a donor of some kind that is the largest
+individual shareholder in SBC?  Some kind of foundation, I
+presume?  Who is this donor?
+

Yep it is a foundation but the benefactor of the foundation is apparently
the largest individual shareholder in his own right. He is a big name in
American telecoms and I would rather not give his name right now.


+> SBC is not an investor in Telkom SA out of the goodness of its
+> heart. It is looking for returns on its investment which are higher
+> than it can achieve in the highly regulated market back home.
+
+Do you mean "DEregulated market back home", given that
+competition for trunk calls in the USA has driven prices to
+astoundingly low levels?  Or do you truly mean "regulated market
+back home" focusing perhaps on the local calling area where
+carriers are generally still afforded a regulated and specified rate of
+return by government regulators that is perhaps lower than what
+they might expect in South Africa?

I meant regulated. From the outside the US with its very rigid structure of
who may do what which came about with the splitting up of Ma Bell appears
not to offer too many opportunities to dominate, and therefore exploit, a
market segment. I guess one could equally argue that that comes with
de-regulation but I think that it is regulation which enables competion. In
either case the opportunity to make large profits has been reduced
considerably.

+
+> Donors, because of their typically high profile parents, are
+very often the
+> only people who have the opportunity and the ability to influence the
+> conditions that are written into the shareholders agreements.
+
+Interesting.  So it sounds like the strategy you are pursuing is to
+work in partnership with the shareholders of companies that are
+purchasing newly privatized African telecoms operators.  And some
+of these shareholders are themselves charitable foundations
+(donors).

I think that the relationship of one particular donor with SBC must be seen
as a-typical. I have not seen any indication that the individual has used
his position within SBC to influence Telkom SA.


The strategy is very definately to use the collective clout of a group of
major US donors to lean on the telco. Telkom SA admits that the last thing
it wants is to open the evening paper, or worse weekend paper, and see a
headline that says "Telkom High Charges Causes Withdrawal of US Donors from
SA." or something to that effect.

Presssure is coming from very high places with meetings between George Soros
and then Deputy President, now President, Tabo Mbeki over the Easter weekend
eighteen months ago.

+
+I suppose what happens is that wealthy industrialists in the USA
+and elsewhere, such as Andrew Carnegie who was a big friend of
+libraries, leave a substantial portion of the wealth in a charitable
+foundation.  These foundations then invest the funds for shares of
+profitable corporations, and use the dividends from those profits to
+do charitable work.  You're saying one foundation, perhaps
+Carnegie itself, has invested funds in Southwestern Bell, a
+traditionally solid profit maker in the USA.  As a shareholder, the
+foundation gets votes at annual meetings for each share, and thus
+can influence the Board of Directors of the Company to interject
+more than a simple profit motive into the company's operations.

As I said in this case it is an individual who also has a very large
foundation. I am quite sure that Carnegie, Mellon, Soros, Ford, Kellog, etc
all have investments as you describe.


+
+> I am fortunate enough to be part of the SA negotiating team which
+> is trying to retofit a solution with the help of the US Donors but
+> it would have been much better done before the government sold part
+> of Telkom SA to SBC and Malayasian Telecom.
+
+Thus you are saying that governments interested in privatizing their
+telecoms operations should consider broad national interests in
+setting the terms of the privatization, yes?  Of course, this could
+substantially reduce the amount of money a private firm would be
+willing to pay government, would it not?
+
+For example, if a parastatal telecoms is sold to a private firm
+without any universal service requirement, and with continued
+monopoly privileges, the private firm might pay quite a high price
+indeed for anticipated high future profits.  If however the private firm
+is required under the terms of the sale to provide universal service
+and to compete with any other private firms that might decide to
+enter the market, then perhaps the private firm would not pay as
+much.
+
+Do you think this had something to do with how the transaction
+was handled in South Africa?  Government needed massive and
+immediate revenues from the sale, perhaps to pay for its
+tremendous public housing programs or to subsidize electricity
+arrears, perhaps to stave off civil unrest.  Is that what happened?
+

Telkom SA was granted an exclusive set of rights for a limited period of
time, 5 or 6 years depending on certain defined goals. In return they had to
meet certain roll out targets, particularly with respect to rural areas. The
two cellular operators were similarly given targets which they had to meet.

The result is that communications capacities in SA have been significantly
extended into previously under-served areas. (Like nothing was there man!!)

They have also, as would I, have taken the opportunity to upgrade the
general networking capacity by deploying new technologies to replace the old
analogue voice system. My University will, for example, be connected very
shortly by means of a fibre ATM based connection to the new national ATM
network. This will carry voice, data and video. We are, I think #2, in this
new approach which sees Telkom switch equipment being rolled out from the
traditional Exchanges to customer sites. This approach will be in place on
all 36 or so Higher Educational campuses within two years or so.

All very exciting unless you happen to be a potential second carrier
watching the financial barrier to entry being raised another notch or two.

+> Hope this gives you some food for thought.
+
+In tremendous quantities, multiple courses.
+

Great.

Henry

+Cheers!
+Jeff @ Nairobi
+
+----
+Information and Communication Technology Programs
+USAID/REDSO/ESA
+Tel +254 (2) 862400 x2762
+Email [log in to unmask]
+Email [log in to unmask]
+PO Box 30261
+Nairobi
+KENYA
--------------------------------------------
Henry C Watermeyer
Director

Computer & Network Services
University of the Witwatersrand,Johannesburg
P/Bag 3, Wits, 2050, South Africa

+27-(0)11-716-3260   cell +27-(0)82-800-8862
                     fax  +27-(0)11-339-1225
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