Vodacom's competitors are just being "spoilers" by trying to hold up a deal between the mobile operator and Neotel in court.
This is according to Vodacom Group CEO Shameel Joosub, speaking to ITWeb at the release of the company's interim results and commenting on the court action against the Independent Communications Authority of SA (ICASA) that has begun today.
"We think that ICASA has followed the process and everything has been done correctly; I think people are just trying to be spoilers," says Joosub.
This as Vodacom's rivals make a last-ditch attempt to hold up the R7 billion deal that has been 18 months in the making. Cell C, Telkom and MTN have all launched separate proceedings to try review or set aside ICASA's decision to approve the deal, and the parties are being heard together in the High Court in Pretoria this week.
Vodacom is still awaiting approval by the Competition Tribunal for its proposed acquisition and the tribunal is set to discuss the application between 23 November and 11 December.
"Neotel will further enhance our ability to contribute meaningfully to the development of fixed-line services, broadband and fibre to homes and businesses in South Africa," according to Joosub.
He believes that so far "Neotel has done well with its hands tied behind its back" but that to be a serious player in the industry, it needs a very serious capital injection.
Joosub says all of the processes for the deal are beginning to wrap up and Vodacom is starting to gain more clarity.
"Hopefully, by the end of the year, we will know where we stand."
Market implications
BMI-TechKnowledge MD Denis Smit says this case has the potential to be precedent-setting and the result will have an impact for years to come.
"This is a very significant case and it will clarify finally the 'correct jurisdiction' of mega-deals as to who has the final say on competition matters; ie, ICASA or the Competition Tribunal.
"Should the deal be approved it will result in a major re-alignment of the local telco industry with massive ramifications. Equally so should the deal not be approved this too has significant ramifications for Vodacom as well as Neotel," says Smit.
Vodacom is acting pretty cool about the case as it believes ICASA has followed due process. Joosub says if his competitors do win the court action "it would just mean that ICASA has to redo the process".
However, Smit says there is no room for Vodacom to be complacent at all because of the scale of the opposition to the deal.
"Never before has such a large legal team with so many advocates assembled for a case like this. The legal industry is, either way, the winner in this all. There are significant legal arguments for both sides."
Smit says if the deal does not go ahead then both Vodacom and Neotel would need to re-fashion their strategic plans.
"The others would breathe a huge sigh of relief as should this deal be approved there will be a major change in the competitive dynamics in the industry."
Spectrum wars
Cell C, Vodacom and Telkom maintain the transfer of Neotel's spectrum to Vodacom would negatively impact competition and as MTN put it: "Entrench Vodacom's already dominant position in the mobile telecommunications market by conferring on it an advantage that could not be replicated by any of Vodacom's competitors."
Joosub doesn't see it that way, saying he believes Vodacom is more capital constrained than anybody else because it has the biggest network.
"Spectrum in itself is not success, otherwise WBS would have been much more successful and Neotel would have been more successful," says Joosub.
"I think there are options for the other players as well; there is Telkom and Cell C talking about a deal, MTN can do a deal with WBS, and if Vodacom does a deal with Neotel then it's all sorted."
He says spectrum is not the only reason the company wants to acquire Neotel, but says "one has to be realistic as well and see that a lot can be achieved with these companies that have spectrum and are not fully utilising it".
Spectrum has always been at the heart of this deal, and certainly at the heart of competitors' oppositions to the deal. When the Competition Commission recommended the Competition Tribunal approve the deal it came with certain conditions, one of which was that Vodacom not be allowed to use Neotel's spectrum for two years.
Joosub says Vodacom debated this issue but in the end it compromised.
"To be frank, we don't think that it's needed, but you know in the interest of moving the deal forward we agreed to it."
What Joosub sees as most key is that operators get some certainty in terms of regulation and spectrum so that they can plan for the future.
"The most important thing is to get on with digital migration, set clear deadlines and a clear roadmap of when exactly it is going to happen by. Then decide if you want to auction the spectrum or whatever form you want it to take, but effectively for operators to know that spectrum will be available from this date, say January 2018. Because then it gives us operators a chance to plan."
He says if operators know the date for the switch, that will free up spectrum from analogue television and make it available to mobile operators, then they can "prepare our networks for that day and on that day we just flip a switch and everything is ready".
However, the date for the digital switch is yet to be announced by government and Joosub says this leaves the industry in an interesting position that they may have to figure out for themselves.
"I think the industry is going to have to make some plans in the interim period until the digital migration happens. It's unfortunate but it's a reality and I think we need to face that."
Waiting in the wings
The prospect of Telkom buying out Cell C doesn't seem to worry Vodacom too much, with Joosub calling it "interesting from an industry perspective as it will couple a big fixed-line operator with a mobile operator to combine their mobile businesses".
Telkom yesterday confirmed it is in discussions regarding a potential deal to acquire all of the shares of Cell C.
Joosub belives the deal will make the combined entity "a credible player".
"I think competition is good generally, but I think consolidation is happening and will continue to happen and we need to accept that.
He says a lot hinges on what happens with the Vodacom-Neotel deal.
"If Vodacom-Neotel doesn't happen then effectively I can't see Telkom-Cell C happening," he concludes.
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