Despite the Independent Communications Authority of SA's (ICASA's) concerns that the wave of consolidation the ICT sector is seeing could scupper efforts to entrench a competitive landscape in SA, consolidation is a natural trend, which is not anti-competitive.
This is according to second network operator Neotel, which presented its stance on the state of competition in SA's ICT sector to the regulator during the second day of the latter's hearings today.
Although rumours had been swirling for some time prior to being confirmed a year ago, Vodacom only officially announced in May that it was set to acquire 100% of Neotel in a deal worth R7 billion. ICASA opened the deal up for comments last month.
In light of the looming deal, Neotel CEO Sunil Joshi said today that the company did not see consolidation as a bad thing. On the contrary, he said, it could help smaller players that do not have the scale required to compete on a national level.
"Competition is effective in a balanced market defined by a level playing field, rather than a number of smaller players with limited market access."
Joshi noted there were several ICT mergers investigated and approved by the Competition Commission in 2007 to 2008, including (among others) MTN and Verizon SA, Telkom and Business Connexion (BCX) and Vodacom and Gateway.
Of these mergers, he said, only one was prohibited by the competition tribunal - the Telkom and BCX merger, which was stonewalled in June 2007. "This suggests that market consolidation cannot be seen as anti-competitive outright. Whether in emerging or developed markets, consolidation is a global trend."
On the local front, he said this year alone, no less than five mergers in the ICT sector had been filed with the Competition Commission, "which is indicative of a maturing market".
He added that not only were there socio-economic benefits to be derived from these mergers, but they could also help facilitate greater competition in both the fixed and mobile telecoms markets and promote infrastructure development. "They may also help to promote growth and development within the sector and enable the achievement of government's ambitious broadband goals."
Independent telecoms researcher Samantha Perry recently noted that, should it get the go-ahead, the Vodacom/Neotel deal would change the landscape for Neotel substantially, "giving the operator the financial clout and critical mass it needs to take advantage of its substantial fibre network".
Other critical competitive areas Joshi said require ICASA's urgent attention include local loop unbundling, fixed-line number portability, toll-free implementation framework, a more rapid deployment of electronic communications infrastructure, application to person SMS services and the consideration of a wholesale termination rate and a review of what he says is a "skewed" Universal Service and Access Framework.
ICASA's inquiry into the state of competition in the ICT sector will resume tomorrow, with MTN, Vodacom, Cell C and Internet Solutions expected to pose their respective cases.
ICASA councillor William Curry says the regulator will produce a draft document of its observations from the hearings "in the next month or so" and aims to wrap up the process - whether it be with a view to policy formulation, or other applicble steps - in December.
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