Telkom CEO asks for 'sensible' spectrum pathway

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 28 May 2019
Mobile operators have been waiting for years to get their hands on more spectrum.
Mobile operators have been waiting for years to get their hands on more spectrum.

Telkom believes South Africa needs an “enlightened spectrum allocation process”.

This is according to group CEO Sipho Maseko, who made the comment during his presentation for the JSE-listed telco’s financial results, for the year ended 31 March.

“We are waiting like everybody else to find out what is going to happen to spectrum. We think there needs to be a sensible pathway forward around spectrum allocation. It must take into account not who shouts the loudest that spectrum is required, but actually how do we ensure the way in which spectrum is allocated is in a way that will foster competition.

“Making sure the regulator does not have to regulate prices but actually you can bring prices down by bringing the right level of competition into the market and we are prepared to slug it out from that perspective.

“If it is not an enlightened spectrum allocation process, it will continue to enhance, in our view, a duopoly in the market,” he said, making reference to the market dominance of MTN and Vodacom.

“We actually think the mobile market is better served by having equally placed competitors who will be able to win by virtue of the value proposition that we put into the market, not by virtue of just being first and we are really keen to change that dynamic,” Maseko said.

Telkom Mobile reported an 85.9% increase in its mobile subscribers over the past 12 months, to 9.7 million, but like its competitors, the mobile operator has for years been pleading for access to more spectrum.

In March, MTN SA CEO Godfrey Motsa shared his frustration, saying SA “is still in a spectrum crunch” and Cell C has also called for the fast-tracking of spectrum allocation. Vodacom has in the past also said a lack of spectrum is holding it back from providing more 4G coverage in rural areas.

Sipho Maseko, Telkom Group CEO.
Sipho Maseko, Telkom Group CEO.

Delay after delay

As the world moves swiftly towards 5G, South African mobile operators are still waiting for the allocation of spectrum in order to provide faster and more widespread high-speed data services. Recent promises from government indicated 4G spectrum would be allocated in 2019 and then spectrum suitable for 5G in 2020.

The Independent Communications Authority of SA (ICASA) last year confirmed plans to license high-demand radio frequency spectrum by the end of March 2019 but that deadline has come and gone.

The Department of Communications (DOC) then said a final policy directive on spectrum allocation would be issued by the end of April, which also did not happen.

Both president Cyril Ramaphosa and finance minister Tito Mboweni have emphasised the importance of the process, as a spectrum auction could raise several billion rand for government. In his State of the Nation Address in February, Ramaphosa went as far as to vow that communications minister Stella Ndabeni-Abrahams would "shortly be issuing policy direction" to ICASA for the licensing of spectrum.

However, in early May, the DOC revealed in a statement a decision to hold back on the release of the finalised policy directive.

"Following extensive consultations in this regard, the minister deems it necessary to hold the policy direction on unassigned high-demand spectrum in abeyance for consideration in the sixth administration," it said, indicating the topic would only be revisited after the May general elections.

Refarming realities

Industry experts believe current spectrum allocations are insufficient for mobile operators to deploy new technology alongside existing legacy 3G and 2G services, which hinders their ability to rollout 4G/LTE on a wider scale, not to mention the possibility of 5G services.

For years, mobile operators have been forced to refarm legacy 3G and 2G services, with a significant risk of degrading these services and affecting customer experience.

Telkom Mobile increased its capital investment over the past year by 30%, to R3 billion, growing the number of base stations by 28.7% to over 5 100. It said 3 438 of those base stations are 4G, an increase of 47% compared to the prior year.

“We started refarming a portion of our 2 100MHz spectrum to LTE, following the successful refarming of the 1 800MHz spectrum for smartphones. The strategic intent of focusing spectrum resources towards 4G contributed to smartphone subscribers increasing by 91.8% to 5.3 million,” the group’s results statement reads.

When asked how ready Telkom was for the sizeable payments likely required to gain access to more spectrum, Maseko said the group had already “modelled a couple of scenarios in terms of what those payments might be and what the balance sheet tolerance is to be able to absorb that”.

Long time coming

Operators have been waiting for years to get their hands on more spectrum. In 2016, operators thought there was finally hope when ICASA made plans to license spectrum in the 700MHz, 800MHz and 2.6GHz bands, which are usually considered as compatible for 4G/LTE technology.

However the Department of Telecommunications and Postal Services (DTPS) challenged the licensing process, saying ICASA should have waited until the National Integrated ICT Policy White Paper was finalised before inviting operators to bid for spectrum. The DTPS won a court interdict to halt the auction.

Mobile operators went from hopeful back to complaining about spectrum scarcity.

In September 2018, the DTPS and ICASA finally agreed to settle the two-year court battle and plans for an auction appeared to be back on the table, but these seem to once again have stalled.

2016’s National Integrated ICT White Paper put forward the idea of a wholesale open access network (WOAN) which called for a shake-up of the previous policy framework for spectrum allocation in favour of an "open access regime".

The Electronic Communications Amendment Bill was supposed to give effect to the policy objectives set out in the White Paper, but in February 2019, Ndabeni-Abrahams withdrew the Bill from Parliament “for further consultations".

Most operators and analysts, however, believe the withdrawal was a good thing as they believe the Bill still needed some reworking, including more clarity on the WOAN.