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    Home » News » MTN objects to Vodacom, Neotel deal

    MTN objects to Vodacom, Neotel deal

    By Duncan McLeod14 November 2014
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    MTN South Africa CEO Ahmad Farroukh
    MTN South Africa CEO Ahmad Farroukh

    In a significant development, MTN has lodged objections at both communications regulator Icasa and the Competition Commission against Vodacom’s proposed R7bn acquisition of Neotel, putting a potentially big hurdle in the way of the conclusion of the deal.

    TechCentral has established that MTN has objected to the transfer of Neotel’s spectrum assets to Vodacom, arguing to both Icasa and the commission that the trading of spectrum in South Africa is not permitted.

    MTN wants Neotel’s spectrum handed back to Icasa so that it can be reassigned to the industry.

    The Neotel deal, if it’s allowed to proceed, will give Vodacom access to bandwidth in the 800MHz, 1,8GHz and 3,5GHz spectrum bands. Neotel is the only operator that has access to spectrum at 800MHz, which is still used by analogue broadcasters. The operator provides code division multiple access or CDMA services using the spaces between television channels, and Vodacom CEO Shameel Joosub has said that the mobile operator is keen to utilise that spectrum, too, presumably for more modern and speeder 4G broadband services based on LTE technology.

    The timing of MTN’s objection to the deal is interesting given that it is at an advanced stage of discussions of its own with Telkom. Under that proposed deal, the two companies intend expanding their existing roaming agreement to include bilateral roaming. Telkom also intends outsourcing the operation of its radio access network to MTN. Though MTN won’t get access to Telkom’s lucrative 4G broadband spectrum in the 2,3GHz band, other bands will be included in the transaction.

    MTN’s group CEO, Sifiso Dabengwa, told TechCentral in March that the group will not object automatically to Vodacom’s proposed acquisition of Neotel. “The issue here is you can’t take a position because of where you are [in the market],” Dabengwa said. “It has to be principled, no matter which side you’re on.”

    Although MTN South Africa CEO Ahmad Farroukh is reluctant to comment on the latest developments, he confirms to TechCentral that the operator has indeed lodged objections to the deal with Icasa and the Competition Commission. Asked if he believes the decision could lead to retaliation by Vodacom at the same regulatory agencies — perhaps seeking to block the proposed MTN, Telkom transaction — Farroukh says simply: “We have to do what is right.”

    MTN’s decision to fight the Neotel deal will come as a blow to Vodacom, which has argued that the deal — and the one between Telkom and MTN — is crucial for the industry.

    Shameel Joosub
    Vodacom CEO Shameel Joosub

    In May, Joosub described the two proposed deals as the industry “making a plan” in the absence of government action.

    He warned that if the consolidation is not allowed to happen, the rapid growth in data that the mobile operators have enjoyed in recent years will evaporate.

    He warned, however, that the two transactions do not represent a solution in themselves. “The solution is the allocation of spectrum. But that will only happen when we sort out the broadcasters in the 800MHz band.”

    South Africa’s migration from analogue to digital terrestrial television — which will lead to the freeing up of the 800MHz band, also known as the “digital dividend,” for broadband — has been delayed for years, mainly due to political indecision.

    Joosub told TechCentral this week that the acquisition of Neotel will help set up a powerful fixed-line competitor to Telkom. He said Vodacom will invest R10bn in Neotel in the next few years.

    Vodacom has said it will not integrate Neotel, but rather keep it as a standalone operating entity that continues to house its own spectrum.

    Neotel began life in 2007 as the “second national operator” to compete with Telkom. Though it’s had some successes in the corporate and wholesale telecoms markets, it has not had a big impact on the consumer market, where Telkom continues to enjoy an effective monopoly in the fixed-line “last mile” into people’s homes.

    The Vodacom deal values Neotel at R7bn. Vodacom has offered to buy out 100% of Neotel from shareholders Tata Communications and its black economic empowerment partner, Nexus Connection.

    Market watchers have cautioned for some time that Vodacom could face a number of regulatory hurdles in acquiring Neotel, not least of which is getting the necessary approvals to transfer the smaller operator’s spectrum assets.  — © 2014 NewsCentral Media



    Ahmad Farroukh Competition Commission Icasa MTN Neotel Nexus Connection Shameel Joosub Tata Communications Telkom Vodacom
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