Much of the recent news in the telecommunications space has been dominated by speculation that Vodacom is in talks to buy Neotel. Now that this has been confirmed, news topics have widened to discuss the pros and cons of such a sale and the significant impact that this is likely to have on the telecommunications sector.
Neotel's Sunil Joshi confirms that Neotel is for sale – but in "exclusive" negotiations with Vodacom. #myBB2013
— ITWeb Online News (@ITWeb) October 9, 2013
Opinions are varied but most voices in the press agree that it’s easy to see why this is an immensely attractive option to Vodacom. Neotel, currently controlled by India’s Tata Communications, has assets that could significantly boost Vodacom’s already dominant positioning in the market. These include, amongst others, access to the company’s radio frequency spectrum, access to the digital dividend spectrum (the only telecoms provider in the market to have this), 15 000km of high-speed fixed fibre, and 8 000km of metro fibre in Johannesburg, Cape Town and Durban. Vodacom Business will benefit greatly from these assets and this will accelerate the growth of the division into a highly competitive business ICT provider.
It’s highly likely that competitors will oppose the deal through the Competition Commission and the Independent Communications Authority of South Africa, arguing that this will increase anti-competitive behaviour in the industry by making one provider simply too powerful. South Africa’s Wireless Access Providers’ Association (WAPA) has already expressed concern saying, “the takeover would stifle competition, lead to job cuts, and do little to reduce the digital divide that it believes should be South Africa’s top priority with regard to broadband.” WAPA also believes that the acquisition will hinder the growth of smaller operators who are also crucial to creating jobs and providing broadband access to all areas of the country.
You may as well just go back to a monopoly and just call it quits, says Cell C CEO on Vodacom / Neotel deal http://t.co/VxYNoVp9Lb
— Burton_Phillips (@burtphill) October 11, 2013
Vodacom and Neotel expressed, in a joint statement, their belief that their combined forces would stimulate competition and allow them to increase services and, “provide high-speed fixed connectivity to many more businesses and consumers.” There has always been much opinion within the industry that consolidation within the sector is crucial to increasing competition and the ability of providers to meet the country’s telecommunication needs effectively.
At that heart of the matter is the question whether this deal will have a positive or negative effect on competition and competitive behaviour within the industry. We will watch this space with keen interest.