Cosatu swayed ICASA on Vodacom

Johannesburg, 26 May 2009

The Independent Communications Authority of SA (ICASA) has admitted a trade union federation's attempt to block the recent Vodacom listing swayed the regulator to rescind its approval for the sale of the mobile operator.

In a statement clarifying its last-minute about-turn regarding the deal, ICASA says it concluded in February that the R22.5 billion deal, which would see Telkom sell 15% of its Vodacom stake to Vodafone and unbundle the rest, did not need the regulator's approval.

According to ICASA, the decision, issued on 16 April, was made following “careful consideration of the matter in terms of the Regulations in Respect of the Limitation of Ownership and Control of 2003 and on the basis of two external legal opinions”.

Following the transaction, SA's biggest mobile operator was set to list on the Johannesburg Stock Exchange (JSE).

However, the regulator now claims that, on 6 May, it received notification of a review to be filed in the High Court by the Congress of South African Trade Unions (Cosatu), challenging ICASA's decision.

ICASA says it became concerned the transaction was taking place in a “contentious atmosphere” and, having had sight of Cosatu's filing, sought a declaratory order.

“The order was sought ahead of the Vodacom listing so that a court could reach a decision on the correctness of the decision taken by the authority, on 16 April 2009. The authority, in a letter dated 14 April 2009, then asked Vodacom whether, in light of Cosatu's challenge, Vodacom intended proceeding with the intended listing and on its views on the implication of the listing on the court process,” says ICASA.

“Vodacom responded saying it would not delay the listing, at which point the authority decided to rescind its decision of 16 April 2009 and to request the matter be brought before a court on an urgent basis.”

Political motives

At the time, the about-turn sent shock waves through the industry, as well as the financial markets, which saw the rand take a 3% beating against the dollar.

A specially-convened High Court hearing, on the eve of Vodacom's intended listing, dismissed ICASA's application to block the listing and the mobile operator made its JSE debut the next day.

However, ICASA's perceived interference was slammed by analysts, who said the move sent signals to international investors that SA is not an investment-friendly destination, and also prompted talk that political motives lay at the heart of ICASA's manoeuvring.

Critics of Jacob Zuma's new government pointed fingers at the new administration and speculation was rife that blocking the Vodacom listing would have been revenge against former president Thabo Mbeki, who initially gave approval for the deal.

However, ICASA has denied this, saying: “It should be noted that the authority's primary function is to regulate the electronic communications sector in the public interest. It is for this reason that the authority deemed it fit, in the interest of transparency, that a public process be followed to allow all interested parties to be heard on the transaction, before a decision was taken on the matter.

“At no point did the authority seek to deny Vodacom the right to list on the Johannesburg Stock Exchange. The authority accepts the judgment as handed down by the Gauteng North High Court and, in light of that, will not continue with the public hearings.”

Speaking a day after the company's listing, Vodacom CEO Pieter Uys also stated government backed the sale of the additional 15% of Vodacom to Vodafone and the subsequent listing.

“Government has irrevocably agreed to the transaction with Vodafone. It gave Vodacom its full support in defending the legal action by ICASA and Cosatu over the weekend,” he noted.