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Forex, load-shedding offset spectrum benefits, says Vodacom CEO

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 14 Nov 2023
Vodacom secured spectrum for R5.4 billion.
Vodacom secured spectrum for R5.4 billion.

Vodacom is struggling to realise the full benefits of the high-demand spectrum it acquired, as power shortages and the volatile foreign exchange rate are standing in the way.

This is according to Shameel Joosub, Vodacom Group CEO, in a wide-ranging interview with ITWeb yesterday, after the company announced its interim financial results for the six months ended 30 September.

In March 2022, the Independent Communications Authority of South Africa (ICASA) concluded the auction of the IMT spectrum – also known as high-demand radio frequency spectrum.

The telecoms regulator indicated the auction process beat financial projections, raising R14.4 billion for the national fiscus.

ICASA received spectrum applications from six mobile players: Cell C, Liquid Intelligent Technologies, MTN, Rain Networks, Telkom and Vodacom.

Bidding for the 700MHz and 800MHz radio frequency bands were MTN, Rain, Telkom and Vodacom.

In its financial results, Vodacom says it secured 110MHz of high-demand spectrum, including 2 x 10MHz in the 700MHz spectrum band, 80MHz in the 2 600MHz spectrum band, and 10MHz in the 3 500MHz spectrum band, for an amount of R5.4 billion.

The spectrum licence was effective on 1 July 2022, and Vodacom paid R3.2 billion in the first half of the prior financial year for this spectrum.

According to the telco, the outstanding amount was paid on 30 October 2023.

This, after the telecoms regulator gave successful bidders of the sub-1GHz (700MHz-800MHz) spectrum bands a deadline of the end of October to pay outstanding amounts.

No more traffic jams

Joosub says while the spectrum has been key in modernising the network, some of the benefits are being eroded by issues beyond the telco’s control.

“Spectrum has brought a lot of certainty in regards to being able to plan properly for the networks going forward,” he says.

“We can now use the spectrum to cater for the 45% traffic increase. The spectrum has resulted in the network becoming more efficient.

“If you compare it to a car – the newer models are much more efficient than the older models. That allows us to cater for capacity in a much better way. Customers are seeing better speeds, as well as better throughput on the sites.”

However, he says some of the benefits have been lost due to the volatile exchange rate. “To put this into perspective, the rand is down...and that affects the price of network equipment. So, we are now buying less equipment than we could a year ago. So that also, somewhat, negated the benefits that you get [from spectrum].

Vodacom rival MTN also lamented the exchange rate issue in its latest results. MTN said forex markets remained volatile, with local currency under pressure against the US dollar and constrained forex availability.

It added that the rand closed September 2023 at R18.90, while in December 2022, it was trading at R17.05 against the US dollar.

“Load-shedding has also negated some of the benefits that we could have got from utilising the spectrum because now we have to divert money into batteries, solar and so forth,” says Joosub.

Shameel Joosub, Vodacom Group CEO.
Shameel Joosub, Vodacom Group CEO.

South African mobile network operators have been spending billions of rands over the years to mitigate against the challenges of load-shedding.

Over the past four years, Vodacom says it has spent over R4.5 billion to keep customers connected during extended periods of load-shedding.

Vodacom is also using the new spectrum to expand its 5G network, says Joosub.

“We are already rolling out 5G aggressively. I think we are just short of 2 000 [5G] sites that we have already deployed. We are rolling out 5G all the time, and as the ecosystem evolves, we will create more 5G sites. By ecosystem, I mean more [5G-enabled] devices coming into the market. 5G is a much more efficient way of carrying data traffic than its predecessors – 4G and 3G.

“But we need to have the devices. The devices are still quite expensive at the moment.”

However, he did not reveal how many 5G sites the company is planning next year, citing “competitive reasons”.

Maziv showdown

Joosub also expressed confidence that the proposed R10 billion merger with fibre infrastructure firm Maziv will get the thumbs up by the Competition Tribunal.

From a mergers and acquisitions perspective, the Competition Commission recently announced its recommendation to the Competition Tribunal to not recommend Vodacom’s proposed purchase of the 30% stake in Maziv.

“We are hopeful that the next step in the process, namely the Competition Tribunal process, will yield a different result. I firmly believe that the transaction will foster economic development and help bridge South Africa’s digital divide in some of the most vulnerable parts of its society,” says Joosub.

“I think given Vodacom’s market share in fibre – 4% to 5% market share – I don’t really see why the Competition Tribunal will not allow the deal. We haven’t really rolled out much fibre over the last couple of years. This [deal] is kind of a way to join forces with CIVH to put in a R40 billion investment that we will make to grow fibre. We are hoping the tribunal will see the pro-competitive benefits of the deal and, hopefully, approve it.”

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