At what price Cell C spectrum?

Johannesburg, 26 Jun 2001

Cell C yesterday received its operational licence, which grants it the right to operate the third cellular network for 15 years, as long is it complies with certain conditions.

However, that licence is little more than a 30-odd-page doorstop without the accompanying frequency spectrum licence, which will grant it access to the radio frequencies needed for GSM services.

That licence is expected soon, and Cell C does not expect hiccups along the way, but the cost may be substantial as MTN and Vodacom are shooed out of their current frequencies to make space for the newcomer.

In August last year, Vodacom said it would cost around R2 billion for it to relinquish the 900MHz spectrum, the frequency used for common GSM services. At the time, it was assumed that MTN and Vodacom would have to swap a part of their 900MHz allocation for space in the 1800MHz band, which is more suitable to high-traffic areas or data transfer.

MTN, which is assumed to be facing a similar bill, and Vodacom were willing to conduct a swap agreement, and both in fact signed such an agreement with Cell C long before its licence was issued. The incumbent operators said their need for new spectrum was tremendous, and that even larger amounts of money would have to be spent on network optimisation without the new spectrum.

But earlier this year communications minister Ivy Matsepe-Casaburri issued intended policy directions which, if enforced, would give all operators access to 1800MHz without using it as a bargaining chip to protect the third operator from its established rivals.

The 1800MHz allocations to MTN and Vodacom still leaves little 900MHz open for use by Cell C, which plans to use that and EGSM (Extended GSM) frequencies as well as 1800MHz in its network coverage.

Cell C would not comment on the likelihood of adjusting the MTN and Vodacom spectrum allocations, but linked it to a roaming agreement it is to conclude soon with one or the other.

"We would be able to speak about that later," said Cell C director and spokesman Zwelakhe Mankazana yesterday. "First we would announce who we will roam with."

The selected roaming partner may be more amenable to giving up spectrum, as it will stand to gain substantially from its commercial arrangement with Cell C.

The issue is further clouded by uncertainty around the ministerial directions. When published, the intended directions elicited a large number of responses and objections from concerned industry players. Among these were the Internet Service Providers Association of SA, which has said that 1800MHz spectrum will give cellular operators an unfair advantage over ISPs and other value-added network service operators. Although all operators are now confident that they will soon be given access to the 1800MHz frequency, the directions are still open to challenge and changes.

Vodacom corporate affairs group executive Joan Joffe says the company cannot yet comment on the matter as it does not know what the Independent Communications Authority of SA (ICASA) plans, and MTN executives were not available for comment. ICASA was not willing to comment on the matter.