Vodacom will gain an unfair competitive advantage that will leave other operators in the dust if it is allowed to buy all of Neotel, MTN SA argued this morning.
During the second day of the Independent Communications Authority of SA (ICASA) hearings into whether the R7 billion deal should be allowed to go ahead, MTN SA CTO Eben Albertyn said Vodacom would gain a 50% cost advantage if it is successful.
Vodacom's bid for all of Neotel is intended to boost its fibre network, as SA's second national operator has more than 15 000km of fibre, which will be a catalyst for Vodacom's plans to roll out fibre-to-the-business and fibre-to-the-home. However, ITWeb understands Vodacom is also very keen to get its hands on Neotel's spectrum in the 800MHz, 1.8GHz, and 3.5GHz ranges.
Albertyn told the panel that allowing Vodacom access to Neotel's infrastructure and spectrum would give it an advantage that cannot be beaten by any other operator. Vodacom will not have won this lead in the marketplace, but this victory would effectively be a gift, he noted.
The Neotel deal would solve two constraints that all operators are facing at the moment: a need for spectrum and fibre, said Albertyn. He added all operators are battling with a lack of spectrum and a need for more databases to cope with the growing "data tsunami".
MTN SA has seen - between 2008 and 2013 - a more than 1 000% increase in the consumption of data, a rate of uptake that will increase with "exponential" implications, Albertyn pointed out. As a result, Vodacom's bid comes at a difficult period for SA's telecoms.
Total dominance
Albertyn noted the deal would entrench Vodacom's dominance in the market. The operator - SA's largest - already turns over more than all its competitors and its subscriber base is close to double that of all its competitors, as is its capital spending, he said.
Cell C has 11% revenue market share, while Vodacom has 52%, MTN 35% and Telkom Mobile just 2%. Telkom has 90% revenue market share in the fixed market.
Adding Neotel to Vodacom's mix, said Albertyn, would consolidate its dominance and provide it with economies of scale that would give it a 50% cost saving. "The question is whether Vodacom should be allowed to adds another structural advantage on top of all its other advantages."
In addition, said Albertyn, Vodacom already dominates the long-term evolution (LTE) space, and its only limitation in being able to roll out a nationwide LTE network is constraint. This, he said, is what it would gain under the deal at a time when other operators are dealing with a dearth of spectrum.
The only way the deal should be allowed to proceed, said Graham de Vries, GM of regulatory affairs at MTN, is if Neotel returns its spectrum to ICASA so it can be reissued.
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