Mobile operator MTN has lodged formal objections with both the Competition Commission and the Independent Communications Authority of SA (ICASA) against Vodacom’s proposed acquisition of Neotel. This has the potential to become a major obstacle in the R7 billion deal.
MTN is objecting to the transfer of Neotel’s spectrum assets to Vodacom as part of the deal. They argue that the trading of spectrum is not permitted in South Africa, and Neotel should therefore hand back its spectrum to ICASA for redistribution in the industry.
According to the documents filed by MTN, “The frequency spectrum currently assigned to Neotel is a public asset. The acquisition price for the Neotel share capital embeds a significant premium relating to this spectrum portfolio. This scarce, national resource has largely been left unutilised during Neotel’s tenure as the SNO due to minimal investment in mobile infrastructure to leverage it.
The South African public has, therefore, not benefited from the allocation of this scarce and highly valuable resource to Neotel over the last seven years. It seems, therefore, highly inappropriate that the Neotel shareholders should now realise a significant windfall from the sale of the assignment of a scarce public asset that they simply hoarded at the expense of the South African public over the last seven years.”
Neotel currently has access to bandwidth in the 800MHz, 1,8GHz and 3,5GHz spectrum bands, and is the only operator with access to spectrum at 800MHz, which is generally used by analogue broadcasters.
Vodacom CEO, Shameel Joosub, has said that Vodacom is keen to utilise this spectrum, which would allow for better 4G broadband services, based on LTE technology.
Telkom CEO, Sipho Maseko, has also voiced concern over the deal, saying the deal, it “must not result in a distortion of the competitive landscape on a number of things, whether it’s access to spectrum or how the spectrum is used.” He did however concede that “Consolidation in the sector is clearly unavoidable.”
This is evident, not only in the pending Vodacom-Neotel deal, but also in a deal between MTN and Telkom, which is in an advanced stage of discussion. The proposed deal would see the two companies expanding their existing roaming agreement to include bilateral roaming and the outsourcing of Telkom’s radio access network to MTN.
Earlier this year Joosub described the two proposed deals as the industry ‘making a plan’ in the absence of government action around spectrum allocation and digital migration.
Vodacom believes that the acquisition of Neotel will help set up a powerful fixed-line competitor to Telkom, with plans to invest R10bn in Neotel in the next few years.
Vodacom has also said it will not integrate Neotel, but rather keep it as a standalone operating entity, that continues to house its own spectrum.