Cell C’s Alan Knott-Craig Senior says he’s not surprised by the Cabinet’s decision to turn its nose up at a proposal from Korea Telecom to buy a 20% stake in Telkom. Why: because in the past, foreign companies have let South Africa down. He says governments, especially in developing countries, have to be involved in telecommunications penetration.

In years gone by, Knott-Craig, who allowed Cell C to shake the mobile market again this week, was a founder of Vodacom.

Vodacom had invested in Telkom, but the fixed-line operator’s shares have shed 46% since May 2009, when it got rid of its investment in Vodacom.

Since then, Vodacom has gained 73%.

Knott-Craig says:

[Government] learnt a lot from when Southern Bell Corporation held its stake in Telkom. It did not do the country any favours. The government was right to be cautious as most telecoms companies are foreign owned and I am not sure if that is such a good thing. What is needed is good management, but that does not have to come with an equity stake.

There are other ways to do this.

What is needed is good management, but that does not have to come with an equity stake.

Southern Bell (now AT&T) exited its 15% Telkom investment in 2002.

Knott-Craig isn’t keen for new players:

We already have far too many in the market and there are new entrants wanting to come in every day. This industry is in need of some consolidation and it would be a shame to let a new entrant in who would end up just going to the wall.

Knott-Craig left Vodacom in 2008, took a hiatus, and joined Cell C in April this year.

His new network operator is the smallest of the three major cellphone network operators. They have a subscriber base of 8,2 million and face the uphill task of penetrating Vodacom’s 31,7 million subscribers, and MTN’s 20,96 million. Telkom’s 8ta has 1,14 million.

That’s the pie that Knott-Craig is after:

My four-year absence from the industry helped me clear my head and figure out what was important to drive it. The shareholders of MTN and Vodacom have gotten used to very big dividends and so for them to lower prices and reduce margins would be very difficult indeed.

They can either lose it the hard way or they can lose it the easy way.

I don’t mind, but they will lose it.

He only wants five per cent of their market, for now.

[Source: BusinessDay]