Neotel Optimistic About Transfer of Spectrum to Vodacom

Since the announcement in May that Vodacom would acquire 100% of Neotel, industry insiders have watched with interest to see if Neotel’s valuable frequency spectrum will be transferred to Vodacom as part of the deal.

Neotel’s spectrum would give Vodacom a huge advantage in accelerating the roll-out of their Long Term Evolution (LTE) network. The deal must however still receive the nod from regulators, with the application to transfer Neotel’s spectrum licenses to Vodacom still to be approved by the Independent Communications Authority of South Africa (Icasa).

When asked about the spectrum transfer, Neotel boss Sunil Joshi was confident that the structures they have in place will be sufficient to warrant approval of the transfer.

Neotel has access to 2x12MHz of 1,800MHz spectrum, 2x5MHz of 800MHz spectrum, and 2x28MHz of 3.5GHz spectrum. According to Joshi, Neotel has deployed networks in each of the frequency bands they have been assigned, which will work in their favour towards keeping the spectrum, as not transferring it would have a negative impact on Neotel’s existing clients.
Once the deal is finalised, in addition to the spectrum, Vodacom will also gain access to Neotel’s 16,500km of national long-distance fibre, (of which about half is their own and half is leased) and around 8,500km of metro fibre.

This will allow Vodacom to potentially offer lower prices and faster broadband speeds to their clients.

There are however some reservations in the industry around the deal. The Wireless Access Providers’ Association (Wapa) has stated that Vodacom should be required to separate itself into distinct wholesale and retail arms when the deal goes through.
According to Wapa many of its members rely on Neotel’s infrastructure to provide services to their customers and the Vodacom acquisition has the potential to threaten that.

“We are concerned that Vodacom is becoming extremely powerful.” Said Wapa chairman Mohammad Patel, “We need to ensure this deal only goes through if Vodacom totally separates wholesale and retail. Then it’s fair.”

While Wapa supports the acquisition in principle, they are concerned that Vodacom does not have a wholesale service, as many of their members are buying wholesale services from Neotel. They are therefore concerned that Vodacom could force through price increases in Neotel’s wholesale services or stop it from selling certain wholesale products.

“Vodacom will have access to Neotel’s infrastructure, and immediately it will be in competition with Neotel’s wholesale clients. Vodacom must also therefore separate its retail/business and wholesale businesses.” Patel says.