Vodacom hopes it and competitor MTN will be granted access to the 1800MHz radio frequency by the end of October. If not, the rate of dropped calls on the cellular networks could increase come December.
The cellular operators were denied immediate access to the 1800MHz spectrum, which they say is essential to their future business. While the 900MHz spectrum where they currently operate allows for easier signal distribution, it can carry less data and voice channels than 1800MHz, which is a more expensive technology.
Public hearings on the spectrum issue to be held by telecommunications regulator the Independent Communications Authority of SA in October could hold the key.
"If, at the public hearings, there aren`t strong objections, we could have 1800MHz by the end of October," says Vodacom MD Andrew Mthembu.
Objectors previously included value-added network service providers, which believe their business will be affected when cellular providers can offer rich data services, wirelessly. Mthembu does not see them changing their minds.
"If I were them I would object too," he says. "Right now we need [1800MHz] for additional capacity, but we will be moving up the value chain to things like mobile data."
Vodacom says it has spent R11.4 billion on its network since starting business in 1994. It is to spend R3.7 billion more in capital projects in the 2000/2001 fiscal year, partly in building capacity in anticipation of competition. But between R60 million and R70 million of that has already been spent on optimising the Gauteng network, an exercise the company says would have been needless without the regulatory heel-dragging.
"About six months ago we took a conscious decision and we called in the suppliers of our network to come up with the most creative plan, a first in the world, to totally revamp the frequency plan [for Gauteng] to get the most out of our capacity," says Mthembu.
The cellular companies have long argued that while they can squeeze additional capacity from their available spectrum, it is not cost-effective.
"If you look at expenditure like that, it adds up and somebody has to pay for it," says Mthembu of the frequency re-planning. "Usually it ends up being the consumer." He says Vodacom`s measures will only ensure high quality network availability until December, after which Gauteng will have to endure the effects of congestion on the airwaves.
Even with the availability of 1800MHz and the data services available using it, Vodacom could still have to spend R15 billion or more within five years to establish a third-generation network.
"It could go to almost the same levels of expenditure, or even more, than our current network," says Mthembu of the high data rate third-generation networks expected to be launched between 2001 and 2007. "Everyone is going that route, but we would have to look at it very carefully in terms of an investment. But if the regulator opens up suddenly and a 3G [third-generation] becomes available we will bid for a 3G licence."
Most of the company`s capital expenditure to date has been funded from its mammoth cash flow, but Mthembu says another way of raising money, possibly a listing, will have to be found by the time a third-generation network is built.
"As we go more into the lower end of the market, our average revenue per user will be depressed. We will not have the same level of profitability two or three years down the road."
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MTN, Vodacom denied data spectrum
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