MTN told communications regulator Icasa on Friday that it should block Vodacom’s proposed acquisition of Neotel because the deal would give the country’s largest mobile operator an unfair advantage.

At public hearings at Icasa’s offices in Sandton, MTN told Icasa officials that allowing Vodacom to buy access to Neotel’s spectrum would give it a significant advantage over its rivals.

Vodacom has offered R7bn to buy 100% control of Neotel, including its spectrum licences. If the deal proceeded, Vodacom would get access to crucial spectrum that could be used to deploy next-generation 4G/LTE networks.

“The change of control should only be approved if the Neotel spectrum is returned for future allocation in accordance with government policy and Icasa regulations,” said MTN South Africa GM for regulatory affairs Graham de Vries.

De Vries said that although giving Vodacom access to this spectrum would probably benefit Vodacom customers who would get wider access to LTE broadband services, the deal would also “remove a fixed-line competitor and a potential mobile competitor”.

There would be a “concentration of a scarce resource in the hands of an already dominant mobile operator”, he said.

“We think the additional public interest considerations should not be that Neotel shareholders should recognise a significant windfall from scarce public assets that they failed to invest in the last seven years.”

MTN South Africa chief technology officer Eben Albertyn told Icasa that allowing the deal to proceed would give Vodacom a “significant scale advantage” over its rivals.

“The very structure and mechanics of mobile broadband networks is the more data you run through [them], the more efficient they become,” Albertyn said.

“The more traffic you apply to it, the lower your cost of production becomes. The incremental cost of production is already heavily in the hands and advantage of Vodacom…

“Should Vodacom be allowed to layer a structural spectrum advantage on top of the layer upon layer of structural advantage it already has…?”

Albertyn argued that Vodacom already had almost two-thirds of the LTE market in South Africa. Lack of access to additional spectrum was the only constraint preventing Vodacom from switching on a national LTE network, he said.

“It’s important to understand that incremental spectrum applied [by Vodacom] would create a national LTE network while all other networks will struggle with spectrum availability and maybe some [capital expenditure] constraints.”

Vodacom would get a cost advantage that the operator would “not have won in the market”, he continued. “It would effectively be a gift from Icasa to give them a structural advantage over everyone in the market.”