Storm brews over spectrum, structure of local industry
Telkom exerts pressure on authorities to bring existing mobile roaming agreements into the spotlight
Telkom is intensifying its appeal to antitrust authorities and the telecoms regulator to relook at business arrangements between its competitors Vodacom and MTN, and smaller industry operators.
Telkom believes the structure of the telecoms market, and in particular how spectrum has and will be carved up in future, puts it at a disadvantage — and is inherently uncompetitive.
"The effects of spectrum arrangements on competition must be scrutinised, particularly ahead of the spectrum auction [in March], which will set the stage for competition in the mobile market for the foreseeable future," Telkom executive for regulatory affairs & government relations Siyabonga Mahlangu told the FM recently.
Spectrum — the radio waves upon which information is transmitted — has not been allocated in SA for close to a decade. The regulator, the Independent Communications Authority of SA (Icasa), has outlined plans to auction R8bn worth of broadband spectrum.
In a market starved of spectrum, Telkom says agreements between Vodacom and MTN, with operators Rain, Cell C and Liquid Telecom, give them access to more spectrum, further entrenching their dominance. If the auction goes ahead without scrutiny of these relationships, it is possible the large operators will have access to even more spectrum, making it even harder to compete, it says.
Vodacom and Rain struck a deal in 2018 allowing the former to ease congestion on its network by leasing Rain’s unused frequencies.
In October, Telkom approached the Competition Tribunal — which adjudicates on all antitrust cases — to revisit the agreements, which were first examined by the Competition Commission and Icasa in 2018. Both found nothing wrong with the deals.
Telkom says the control that Vodacom has over Rain’s operations amounts to a merger.
If the tribunal finds that this is the case, it may disallow it if it is seen to stifle competition and the operators could pay a fine for not notifying the authorities of the merger.
But a Vodacom spokesperson says the agreements have enabled the entry of Rain, a new competitor in the mobile retail market, "as well as allowing for wider sharing of existing infrastructure to improve efficiency of network deployment".
"Rain provides aggressive retail offers for mobile data, to the benefit of consumers," says Vodacom. The Vodafone subsidiary says it does not control Rain’s spectrum. "The roaming agreements are on a nonexclusive basis and Telkom is free to engage Rain to roam on its network."
Telkom made similar arguments at Icasa’s public hearing into mobile broadband services which began last week. During the hearings, it also brought into question MTN and Cell C’s roaming agreement — an issue first raised in 2019, citing the dominance it would give MTN. Cell C will use MTN’s facilities with its own spectrum, in an effort to improve its network quality and reduce its need for capital expenditure.
MTN says its agreement with Cell C has been approved by Icasa and the Competition Commission.
In addition to a roaming agreement, the operators have entered into a services agreement where MTN will provide network services to Cell C "and at no point in time will MTN acquire any form of control over Cell C as a result of this arrangement. In this transaction, each party controls its own core network and keeps ownership and control of its allocated operating licences and spectrum assignment," says MTN.
Cell C says the agreement is in line with shifts in the global telecoms industry to make more efficient use of existing infrastructure.
"It does not reduce competition, it enables both network operators to continue competing on services, innovation and prices, while achieving savings on infrastructure," says Cell C.
Telkom also has a roaming agreement with Vodacom to let it use Vodacom’s towers in certain areas. But Mahlangu says Telkom’s arrangement with Vodacom is different. He says Vodacom had no control over their spectrum assets and that Telkom has the freedom to build its own towers in areas where it gains enough customers to justify such expenditure.
Both MTN and Vodacom have expressed frustration with Telkom’s claims that it is a smaller player in the market.
"Telkom has a vast infrastructure base, including the most extensive fibre deployment in the country, which they could make available to Rain and other operators, should they choose to do so," says the Vodacom spokesperson.
Vodacom, which has a mobile customer base of about 40-million, says Telkom has more spectrum than any other operator "which is almost double the amount of spectrum which Vodacom has", despite its smaller customer base.
Telkom has about 12.5-million subscribers.
During the hearings, which are expected to run to March, MTN GM for regulatory affairs Moses Mashisane said: "Telkom [is] making this point that they are the smallest in the market. This is not how we view it."
"When we look at Telkom, it’s roughly the same size as MTN, if you talk of revenue. We’re not even half the size of Vodacom, but we’re all put in the same basket. Vodacom is clearly the leader in this market and Telkom is not a small operator."
In its most recent full year, MTN SA reported revenue of R36.4bn, against Telkom Group’s R43bn.
"The thing about Telkom coming to you [Icasa] and saying they’re small is that they don’t tell you about their fixed line, which is useful when it comes to broadband. I think it’s unfair," Mashisane said.
But Dominic Cull, on behalf of industry body Internet Services Providers Association, does not believe "there is effective competition" in mobile broadband services.
"Consumers have a very limited choice of service providers and we are now in the second decade of calls for mobile data prices to fall."
Cull says in the ADSL and fibre space, corporate and individual consumers are spoilt for choice and prices reflect this. New fibre networks are "open access" and provide a platform for internet service providers (ISP) to compete.
"There is no such competition in mobile data services because the network operators do not follow an open access model – they give preference to their own ISP services at the expense of third-party competitors," says Cull.
James Hodge, the Competition Commission’s chief economist, says the dominance of large operators is reinforced by an imbalance in infrastructure. Smaller networks simply cannot keep pace with the required expenditure, and have resorted to using debt in the case of Telkom and outsourcing in the case of Cell C.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.