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MWEB sale a signal of change

The announcement last week that Naspers has put MWEB up for auction created a stir of surprise, but not shock. Arthur Goldstuck looks at the implications


Is the decision by Naspers to sell MWEB a vote of no confidence in the Internet? Hardly. If anything, it declares the opposite: a recognition that the Internet has become so pervasive, its best businesses will be built on what people do on the network, rather than on how people connect to it.

While it may not be a good thing for MWEB, it is probably a necessary thing as MWEB evolves from an ISP into a telecommunications company. MWEB is entering a new era in South African telecommunications and has little choice but to become an infrastructure owner – once the regulatory environment allows it. Naspers is traditionally in the content space, and has avoided owning the plumbing that makes it all work. It will be a painful divorce, but good for the kids.

Naspers is in the midst of an aggressive global expansion programme that revolves around communities, such as their instant messaging platforms in China and Poland and e-mail portal in Russia; and around transactions, such as their auction platforms in Europe. The shopping and content aspects of MWEB fit comfortably here, but not the ISP element. The ISP element, in turn, would be the ideal platform from which a new MWEB network would initially be marketed – or on which the player purchasing MWEB would build their own consumer network.

The obvious suitors are those who are also haggling with or fighting with the regulator, such as Altech, which has the resources and expertise, but not the subscriber base, and Vox Telecom, which has a subscriber base but is in distant third place to Telkom Internet and MWEB. Internet Solution is obviously in play, having previously sold off its own consumer Internet service provider Icon to MWEB, and then brought MWEB back into the fold as its backbone network provider.

The mobile networks all have a reason to buy MWEB in order to enter a new subscriber space, with the existing mobile subscriber base saturated. It will make for good synergies with their 3G networks and provide a natural growth area for their data services. Vodacom, with its new ISP, is probably the readiest for it, but MTN, which is lagging behind in data services, probably has the greater need. It is also an opportunity for foreign players to reenter the market, after the progressive abandonment of this market in the last decade while global ISPs were faltering.

This is the fifth major signal that the Internet space of the next five years will look nothing like it did in the last five years. The announcement of Neotel’s Seacom cable was the first, Vodacom’s ISP was the second, the Government’s Infraco cable was the third, and the generous data bundles Neotel recently unveiled were the fourth.

Next up is MTN buying Verizon, which is still unconfirmed, and still subject to the Competition Commission approving the deal. Other ISPs object strenuously, but in the current South African buzz of mega-deals and proposed acquisitions, it is just another day at the Internet office.

The momentum that we are now seeing in the connectivity space is massive, and the consumer will benefit hugely in the long term. In the immediate short term, though, it will be a story of great frustration as new offerings and alliances are bedded down.

One Comment, Comment or Ping

  1. John Gordon

    Who is buying Mweb


The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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