Vodacom is ditching its 24,9% stake in iBurst parent Wireless Business Solutions (WBS) Holdings to increase its chances of being awarded radio frequency spectrum that will allow it to build a fourth-generation (4G) cellphone network. But black shareholding requirements could trip it up.

The mobile operator confirmed last week that it would sell WBS so as to be eligible to bid for spectrum in the 2,6GHz and 3,5GHz radio frequency bands that it could then use to build a network using long-term evolution (LTE) technology. LTE is likely to be the successor to the 3G networks operated by Vodacom and its rival MTN.

Icasa has warned that no company with spectrum in 2,6GHz and 3,5GHz will be eligible to take part in what is expected to be a spectrum auction of some kind.

Vodacom SA MD Shameel Joosub says access to spectrum was a key consideration in the company’s decision to sell its stake in WBS. But he says Vodacom also “took into account the fact that it will be difficult [from a regulatory perspective] to increase our shareholding above 25% as we compete in the same market more and more”.

But winning spectrum in the 2,6GHz and 3,5GHz bands will not necessarily be easy for Vodacom. Icasa has already hinted that it wants to license new players to make SA’s telecommunications industry more competitive. A bigger sticking point, though, is Icasa’s decision that only companies with 30% or more of their equity in the hands of black shareholders need apply.

That means that incumbents Vodacom, MTN and Cell C — none of which meets the requirement — could be excluded from the process.

“We are waiting to see the full regulations, so it is premature to comment at this stage,” says Shameel about the 30% rule. “When considering spectrum allocation issues, it is worth noting that only companies with significant infrastructure already in place will be able to quickly utilise the additional spectrum to increase access to communications in a meaningful way, particularly high-speed data access.”

Indeed, analysts say Icasa will have to be careful in balancing the need to foster new competition in the telecoms industry and ensuring that the spectrum is used optimally for delivering services.

Given that it’s likely there’ll be many more applicants seeking access to the spectrum than there is spectrum available, Icasa will have to tread carefully, they say.

Vodacom first acquired an equity interest in WBS several years ago when it was unclear whether it would be granted spectrum in the 2,6GHz or 3,5GHz bands.

The company invested about R100m in a 4G WiMax network, which it built on WBS’s behalf.

Joosub says this investment will not go to waste. “Access to WiMax services are covered by a separate commercial agreement and this is not affected by the sale of our stake in WBS.” — Duncan McLeod, TechCentral