Telkom seeks to reverse Vodacom-Rain deal
Rain has a lease agreement for using Vodacom’s network towers, while Vodacom has a roaming agreement to use Rain’s 4G network
Telkom has asked antitrust authorities to relook at business arrangements between Vodacom and a Michael Jordaan-backed mobile data start-up, a move that threatens to unravel an important radio frequencies sharing agreement.
Vodacom and Rain, which also counts Patrice Motsepe’s African Rainbow Capital as an investor, struck a deal in 2018 allowing the former to ease congestion on its network as SA took its time to auction new spectrum by leasing unused radio frequencies from Rain.
But Telkom, the fixed-line phone operator in the middle of a transformation journey to become a modern telecoms player to challenge Vodacom and MTN, said the arrangement is akin to a merger because the bigger company does not only use the spectrum but also has control over Rain, including the planning, rollout and maintenance of its radio access network.
Rain has a lease agreement through which it can use some of Vodacom’s network towers for its services. At the same time, Vodacom has a roaming agreement allowing it to use Rain’s 4G spectrum, or radio frequencies on which data and information are carried.
Siyabonga Mahlangu, Telkom’s group executive for regulatory affairs and government relations, said Vodacom’s ability to control Rain’s spectrum entrenches its position as a dominant player in a highly concentrated market.
“It is the supplementation of the capacity of the dominant market player,” Mahlangu told Business Day.
“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.”
The regulator, the Independent Communications Authority of SA (Icasa), outlined plans earlier in October to auction R8bn worth of broadband spectrum over the next six months.
Telkom said on Wednesday it had approached the Competition Tribunal, which adjudicates on all antitrust cases, to revisit the agreements, which were first examined by the competition watchdog, the Competition Commission, and Icasa in 2018. Both found nothing wrong with the deals.
Vodacom and MTN have been trying to squeeze more out of the allocated radio waves as an increasingly number of their subscribers use smartphones to browse the internet and stream videos due to delays in the auctioning of additional spectrum.
That prompted them to strike deals with smaller rivals such as Rain. Telkom also has a roaming agreement with Vodacom under which the partly privatised company uses Vodacom’s towers in certain areas.
But Mahlangu said Telkom’s arrangement with Vodacom is different. “Vodacom doesn’t control us. We don’t control them.”
He explained that Vodacom had no control over their spectrum assets and that Telkom has the freedom to build its own towers in areas where they gain enough customers to justify such expenditure.
Rain’s chief marketing officer, Khaya Dlanga, said that the company “competes fiercely” in the retail 4G and 5G data markets, and that the deal is non-exclusive to Vodacom.
A Vodacom spokesperson said the company remained confident that arrangements are not harming competition or constituting a notifiable merger.
If the tribunal does find that this is in fact a merger, then it may disallow it if it is seen to stifle competition in the market and the operators could pay a fine for not notifying the authorities of the merger.
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