Telecommunications companies are calling on South African regulators to scrutinise the deal whereby Cell C is looking to transfer licences to The Prepaid Company, a subsidiary of majority shareholder Blue Label Telecoms.
This week, the Independent Communications Authority of South Africa (ICASA) convened public hearings on the applications for the transfer of control of the I-ECNS and I-ECS licences from Cell C to The Prepaid Company (TPC).
JSE-listed Blue Label has a non-controlling 49.5% stake in Cell C, and is looking to get an additional 4.04% stake via TPC in order to get control of South Africa’s fourth-biggest mobile operator.
The Competition Tribunal is also set to make its own determination about the proposed licence transfer.
This after, in April, the Competition Commission gave Blue Label Telecoms the go-ahead to take over Cell C.
However, the deal has faced opposition from CellSAf, one of Cell C’s oldest shareholders. CellSAf, which has a 25% shareholding in Cell C, reportedly said it had not been consulted over the issue.
Remedial action
Byron Kennedy, Vodacom’s spokesperson, tells ITWeb that the company participated in the hearings on 19 September.
According to Kennedy, Vodacom confirmed that its competition concerns were addressed in the conditions proposed by the Competition Commission and so it did not need to address these issues before ICASA.
He notes that Vodacom directed its submissions at the importance of ICASA’s role in considering how the licensed spectrum is being used and how it will be used if the transaction is approved.
“On the basis of the evidence available to Vodacom, Vodacom holds the view that the Cell C spectrum is not used lawfully in terms of the relevant licences or in accordance with Electronic Communications Act.
“Vodacom is challenging the validity of ICASA’s decision to approve Cell C and MTN sharing their spectrum in the High Court but, in the ICASA hearings, it pointed out that the evidence indicates that Cell C and MTN are not complying with the conditions of that approval either.”
Vodacom contends that control of the Cell C spectrum licence should not be transferred unless and until this is remedied.
Adds Kennedy: “ICASA is empowered to take action against non-compliance and should not permit Cell C to transfer rights in the spectrum licence while the spectrum is not being used lawfully.
“In this instance, Vodacom asserts that ICASA must either prohibit the transaction, alternatively afford Cell C an opportunity to remedy the situation, after which further public hearings must be held to reconsider the transaction.”
Pooling arrangements
In a statement, MTN says the proposed transaction will result in TPC obtaining control over the Cell C licences, which requires ICASA approval.
MTN says it has requested that the Competition Tribunal consider and test whether the proposed merger conditions adequately address the potentially adverse impacts on competition of the proposed transfer of control of Cell C’s licences.
The telco adds that these considerations would not necessarily justify refusal of Cell C’s application, but are relevant to ICASA’s decision-making process and any conditions ICASA may impose should it wish to approve Cell C’s applications.
Within the context of the transaction, MTN also responded to the submissions of Vodacom and Telkom as they relate to the pooling arrangements concluded between Cell C and MTN.
Spectrum pooling is a strategy in which multiple radio spectrum users can co-exist within a single allocation of radio spectrum space. One use of this technique is for primary users of a spectrum allocation to be able to rent out use of unused parts of their allocation to secondary users.
Vodacom is accusing ICASA of pooling high-demand spectrum between MTN, Liquid and Cell C “in secret, in a manner contrary to the Electronic Communications Act and unlawfully in other respects”.
“MTN takes the view that as these pooling arrangements have already been approved by ICASA and MTN is fully compliant with the approval conditions, they are irrelevant to the TPC and Cell C transaction,” the mobile operator says.
“MTN remains committed to fostering a competitive environment in the ICT sector and believes that a comprehensive evaluation of the proposed transfer of control is essential.”
The company notes it will continue its engagement with ICASA and the Competition Tribunal to ensure the interests of consumers and fair competition are upheld.
Responding to ITWeb, Telkom says it did not object to Cell C’s application. “A short submission was made by Telkom requesting that ICASA, in its deliberations, closely consider the issue of control of Cell C’s spectrum licences. Telkom did not raise any other material issues in its submission.”
Cell C had not responded to ITWeb’s request for comment by the time of publication.
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