Communications regulator Icasa failed in its regulatory duty when it allowed Vodacom and Rain to enter into a national roaming agreement, Cell C told the Competition Commission on Thursday.

The decision to allow the transaction has handed Vodacom a massive advantage over smaller players, which could distort the industry in the market leader’s favour, Cell C chief strategy officer Robert Pasley told the commission’s inquiry into the data services market.

The roaming agreement effectively handed Vodacom access to Rain’s spectrum, and by 2020, according to Cell C’s calculations, will give Vodacom a “technical value” of at least R11.5-billion in savings and benefits.

Vodacom and Rain (formerly Wireless Business Solutions) concluded the transaction two years ago. Cell C complained to Icasa about the deal, but the regulator determined that no spectrum sharing was technically taking place between the parties and would therefore not prohibit the deal.

“Cell C has not been able to get access to the relevant documents in the transaction, but it’s clear from the agreements that we have seen, via Icasa, that Vodacom has concluded a national roaming agreement with Rain, which is odd given their (Rain’s) network hardly extends beyond the province of Gauteng, or at least didn’t when they launched,” Pasley said.

“The terms suggest the roaming is provided for almost the same price that Vodacom charges to Rain to get access to 5 000 of Vodacom’s sites. The reason this is a cause for concern for Cell C is that Vodacom’s dominance will be entrenched further as it’s able to gain access to Rain’s valuable spectrum in the guise of a network-sharing or roaming agreement,” he said.

‘More favourable’

“The terms on which Vodacom has agreed to allow access to its sites with Rain are far more favourable than the terms that Cell C has received from Vodacom for some of the same sites and in general.”

Pasley said allowing Vodacom access to Rain’s spectrum constitutes “regulatory failure” that has given a new competitive advantage to Vodacom that will harm smaller network operators.

“With lower unit costs, the large operator (Vodacom) will be able to earn higher profits, even if under the competitive pressure of the smaller operators. These large profits will come from relatively high consumer prices, with small operators lacking the overall scale or spectrum advantage to sustainably challenge the entrenched large operator.”

Pointing to Rain’s decision to stop selling fixed-wireless access through Internet service providers, Pasley said “it’s obvious” the roaming deal was “primarily for Vodacom’s benefit. The retail offering appears to have been a smokescreen,” he said.

“Icasa has failed to give consideration to the competitive effect of the Vodacom/Rain transaction, which is ultimately only about access to spectrum. The results have already benefited Vodacom substantially.

“The Competition Commission has also declined to investigate the arrangement as a merger, despite the effective acquisition of one of Rain’s major assets. In fact, its only asset.”

Pasley said Cell C had also sought a roaming deal with Rain, prior to signing a 4G/LTE roaming agreement with MTN earlier this year. “We were unable to obtain a reference roaming offer from Rain, or even an outline of the commercial terms that we would likely receive from them. This is despite the fact that Rain has asserted it is willing to negotiate non-discriminatory roaming agreements with other parties.” — © 2018 NewsCentral Media