Telkom cries foul over Rain, Vodacom spectrum deal

Date: Oct 15, 2020

Partially state-owned Telkom has approached the Competition Tribunal, claiming Vodacom’s spectrum agreement with Rain constituted a merger, and should be subjected to scrutiny by the competition authorities.

Telkom yesterday said it wanted the tribunal to declare the suite of spectrum arrangements between Vodacom and Rain as a merger that should have been notifiable in terms of the Competition Act.

Telkom group executive for regulatory affairs and government relations, Siyabonga Mahlangu, said Vodacom’s ability to control Rain’s spectrum entrenched its position as a dominant player in a highly concentrated market.

“It is important that the effects of spectrum arrangements on competition are scrutinised. Particularly, in light of the upcoming spectrum auction, which will set the ground for the nature of competition in the mobile market for the foreseeable future,” Mahlangu said.

The Independent Communications Authority of SA (Icasa) started receiving applications for the spectrum auction this month.

A Vodacom spokesperson said: “Both the Competition Commission and Icasa investigated the agreements between Vodacom and Rain in 2018. The commission found that the 2018 agreements do not constitute a merger in terms of the Competition Act.

“Furthermore, in its discussion document on the Market Inquiry into Mobile Broadband Services in South Africa, Icasa stated that the arrangement has facilitated the expansion of Rain as a wholesale and retail competitor in mobile broadband, which Icasa deemed to be pro-competitive.

“Vodacom remains confident that the agreements between Vodacom and Rain do not constitute a notifiable merger and do not contravene the Competition Act.”

Vodacom recently extended and renegotiated its roaming agreement which improved the cost of its capacity bought from Rain. Roaming agreements enable smaller operators the ability to offer services to their subscribers in areas where they lack their own network infrastructure, giving them the ability to compete with the large operators.

Mergence Investment Managers head Peter Takaendesa said the outcome of the case could have implications for the MTN-Cell C deal, as well as the proposed new spectrum allocations scheduled for early next year.

“The outcome of the Telkom challenge on the Vodacom-Rain agreements is likely to depend so much on the technicalities of those agreements, as we understand that regulatory authorities are largely in favour of infrastructure or network capacity sharing, although this has to be done in a way that encourages competition in the industry,” said Takaendesa.

Late last year, MTN concluded an extended roaming agreement with Cell C that enabled Cell C customers to roam on MTN’s data network nationally.

The roaming agreement also allows Cell C to offer national 4G coverage to customers through MTN’s network without having to incur high costs in developing its own national network. This enables Cell C to enhance its service offering.

Takaendesa said there had been concerns about the measures taken by Vodacom and MTN to deal with new spectrum allocation delays. “These measures have included deals that the largest mobile operators have concluded with other licensed spectrum holders over the past few years to access capacity as mobile data traffic continued to grow strongly,” he said.



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