Voda-Neotel deal flies into flak

Cell C and MTN have filed papers at the high court seeking the setting aside of communications regulator Icasa’s decision on June 11 to approve the deal.

‘Unlawful’ procedure

The two operators’ legal maneuvers come three months after Telkom filed papers at the high court arguing that the procedures Icasa used to approve the Neotel acquisition were “unlawful”.

Telkom, too, wants the decision set aside. In Cell C’s founding affidavit, chief legal officer Graham Mackinnon argues Icasa’s approval of the Vodacom/Neotel transaction contains no conditions.

“The approval was not, in its express terms at least, given subject to any conditions.” But it’s Icasa’s “failure” to determine the impact of consolidation of spectrum under Vodacom’s control would have on competition before approving the deal that lies “at the heart of Cell C’s review application”, Mackinnon says.

He says the proposed change of control of Neotel’s spectrum licences — which was approved by Icasa — will change the competitive landscape dramatically.

“It provides Vodacom with control (directly or indirectly) of an additional 90MHz of spectrum formerly assigned to Neotel. It will thus hold a 90MHz spectrum advantage over MTN and Cell C, its direct competitors,” he says.

“Critically, Vodacom will control twice the amount of 1 800MHz band spectrum as the rest of the market and, uniquely, would get access to spectrum in the 800MHz band, which it did not have before,” he adds.

All operators are keen for access to 800MHz for more, cheaper and widespread mobile broadband coverage.

“From the perspective of Cell C and a number of other market participants, this advantage will have severe negative implications for competition in the South African telecoms market,” says Mackinnon. Vodacom will be able to “attract sufficient subscriber revenues away from other operators to prevent them from reinvesting significant profits into such improvements”.

“Consumers will be the ultimate losers as Vodacom will have no incentive to lower its prices and rivals such as Cell C and MTN will be forced to raise theirs to meet their increased costs.”

Power struggle

The latest developments come against the backdrop of an apparent battle over powers and jurisdiction between Icasa and the Competition Commission.