Why S&P expects sharing to hurt the bigger networks
Regulations that require mobile operators to share infrastructure would probably be credit negative for the larger companies in the sector, says Mark Habib, director of corporate ratings at S&P Global Ratings.
In November, the government published the contentious Electronic Communications Amendment Bill, which proposes that mobile service providers share resources, including spectrum and infrastructure.
Citing international examples, Habib said the separation of infrastructure from operating companies tended to have negative credit implications for market leaders.
"It’s credit negative in our view, in that [the largest service providers] lose a unique part of their business — their infrastructure, which is a way for them to differentiate themselves from their competitors," Habib said in an interview at S&P’s offices in Johannesburg.
"In many markets, there has been some pressure from the government, regulators and sometimes even from the public to see more independence on the part of infrastructure providers. "That’s largely coming from a place where there was an incumbent that was a state-owned monopoly and then as they moved towards a more competitive market, they’ve remained essentially in control of the infrastructure."
In the Czech Republic, for instance, O2’s telecommunications infrastructure assets were spun off into a separate company in 2015. There have been similar discussions in the UK and Italy.
"That has been a solution that doesn’t go to the same extent that is being discussed here [in SA]," Paris-based Habib said.
"What is being contemplated today in SA goes further than the legal separation that occurred last year in the UK with BT’s Openreach fixed network."
One of the recommendations of the bill is the establishment of a wholesale open-access network (Woan), which would house the highly sought-after bands of spectrum that Vodacom, MTN and other operators covet. It remains unclear how the Woan entity will operate. Public hearings on the bill are to be held in the coming weeks.
Omega Collocott, corporate ratings director at S&P’s Johannesburg office, said the bill was unlikely to be a priority for the government. "The government has a lot of priorities at the moment," Collocott said.
"There are a lot of bills on the table and a lot of them require financial commitments, and finances are quite stretched."
Free Market Foundation executive director Leon Louw said in December that if infrastructure was shared, operators would no longer have an incentive to invest in their networks.
The bill also aimed to eliminate the "duplication" of infrastructure — meaning that if a certain area had sufficient coverage, network operators would not be allowed to add their own infrastructure in the same area without permission, Louw said.