The Independent Communications Authority of SA's (ICASA's) proposal that firms vying for high-demand spectrum have a 30% historically-disadvantaged individuals (HDI) ownership stake could see dominant players like Telkom and Vodacom losing out.
Towards the end of last year, the authority released a framework to license spectrum in the coveted 2.6GHz and 800MHz bands. It has proposed doing away with auctions and is instead inviting proposals from operators.
However, in order to qualify for a licence, companies will have to have a minimum 30% historically-disadvantaged ownership level, already have electronic network communications licences, and be financially credible, Dumisa Ngwenya, GM of engineering and technology, said at the time the framework was released.
ICASA did not clarify exactly how HDI ownership would be measured. However, both Telkom and Vodacom's empowerment stakes fall well below 30%, while MTN and Cell C's black ownership levels are not far off 30%.
Spokesman Jubie Matlou says no companies have, so far, raised concerns over HDI. He says the intention “is not to punish existing players, but improve the competitive and broadband landscape and enable new players to enter the market after years of exclusion”.
Matlou notes that broad-based empowerment has seven elements and one of these relates to equity in terms of HDI. “This measure may be used to equate what is expected in terms of the 30% required in terms of the object of the act.” The onus of proof lies with interested entities, he says.
Limited scope
Richard Hurst, Ovum's emerging markets analyst, says the 30% requirement can only be interpreted in the context of ICASA's framework as meaning black ownership levels.
The lack of a 30% stake could see companies such as Vodacom and Telkom shut out from receiving high-demand spectrum, or lead to the creation of new telecoms players, Hurst notes.
ICASA is “trying to aim for the best of both worlds” and enable competition, says Hurst. However, the 30% requirement may see companies joining forces with empowered firms to qualify. Hurst adds that access to the high demand spectrum is vital for Telkom's mobile player, 8ta.
The requirement is likely to lead to protracted negotiations and challenges, which would lengthen the process, says Hurst.
ICASA initially set a deadline for invitations to apply for the end of this month, but has already pushed that out to 29 February, as communications minister Dina Pule needs to finalise the policy directions on high demand spectrum and digital dividend.
Counting points
Vox Telecom, an alternative player, points out that the 30% HDI requirement will cut some players out of qualifying for spectrum. Chief commercial officer Murray Steyn says the current framework “excludes some of the incumbents”.
Joint-CEO Douglas Reed says the company was looking at applying the last time ICASA had an auction. However, it is still assessing its position and will make a decision soon on its exact approach.
Reed notes that Vox's HDI stake is above 30%, regardless of how it is measured.
According to Telkom's latest empowerment rating certificate, it is 8.23% black-owned. The certificate was signed off by the National Empowerment Rating Agency last December.
When asked whether the company would apply for spectrum and what plans it had in place to ensure it qualified for spectrum, Telkom said: “Telkom has noted the contents of ICASA's draft spectrum assignment and draft ITA, and will be making submissions to ICASA in due course.”
Telkom adds it will “consider the feasibility of participating further in the process” after ICASA has finalised the spectrum assignment and the Department of Communications wraps up the policy directive.
Vodacom, SA's largest mobile operator, did not respond to specific queries either, indicating it was still studying the documents. According to the operator's latest empowerment certificate, issued by Empowerlogic last May, the company has 7.91% black ownership.
SA's second-largest operator, MTN, did not quantify its empowerment stake. However, after the company sold 4% of its ordinary shares to members of the black public through the Zakhele empowerment scheme, it is at least 29% black-owned.
Graham de Vries, GM of MTN SA's legal and regulatory unit, says it is preparing its comments on ICASA's invitation to apply, which need to be submitted by the end of February.
Mothibi Ramusi, Cell C's executive head of regulatory affairs, says it is also putting together its response, but will apply for spectrum as it is “within our business interest to grow”.
The company cannot comment much until the process is finalised, but “believes that the process must be fair and consider most importantly what the company has invested to date,” notes Ramusi. Cell C is 25% empowered through its partner, CellSaf, and will “work towards any compliance that will be required at the time”.
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