ICASA, the regulator for the South African communications sector, responsible for the regulation of broadcasting and telecommunications services has jurisdiction on all nine provinces of South Africa It is charged with licensing telecommunications and broadcasting service providers, monitoring compliance of licensees against their license conditions, developing policy, managing the frequency spectrum and protecting consumers within the communications environment. Icasa granted a new licence to SNO the parent of Neotel Company.

The decision to grant the new license came after some consumer groups have complained that call charges are too high so the government decided to cut business costs by allowing a rival to challenge Telkom, Africa's biggest phone company. Telkom was a government firm until 1991, and then became a private company, Africa's leading and most dynamic telecommunications company, providing integrated communications solutions to an entire range of customers but the only one allowed to install fixed lines.

Neotel is threatening the profit growth of Telkom, predict the experts. Telkom is preparing for the impact by cutting its workforce and wage bill.

The mobile subsidiary Vodacom, which is co-owned by the UK phone company Vodafone has over 19 million users and is benefiting from economic growth in South Africa that is boosting consumer spending power. Revenues at Telkom's fixed-line phone business increased helped by a rise in data services.

In South Africa the demand for phone services, especially mobile, are increasing as the country's economic growth helps boost consumer spending power. The fixed-line telephony will meet the same growth. Ajay Pandey, the managing director of Neotel advises that "they aim to reduce the cost of doing business in the country." With the new fixed-line provider the South African's market is opened and the monopoly of Telkom ends.

Neotel announced that they will "change the telecoms landscape" as they plan to invest 11 billion rand (about '802m) over the next decade and will begin operating for business clients in December, focusing initially on urban areas. The first cities to have their lines will be: Johannesburg, Cape Town, Durban and Pretoria.