We're still in a spectrum crunch: MTN SA CEO

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MTN SA CEO Godfrey Motsa.
MTN SA CEO Godfrey Motsa.

South Africa is still in a spectrum crunch and awaiting the release of high-demand radio frequency spectrum from government.

This is according to MTN SA CEO Godfrey Motsa, speaking to journalists at a press briefing after the group's full year results presentation in Johannesburg.

Last year, the Independent Communications Authority of South Africa (ICASA) said it planned to license high-demand radio frequency spectrum by the end of March 2019 but no official information has yet been released about how and when the spectrum will become available.

MTN, at the beginning of the month, announced it had done a deal with Liquid Telecom SA to roam on Liquid's 4G network.

"The spectrum auction in SA has been imminent for three years," MTN group CEO Rob Shuter said when asked about why the deal was done if more government spectrum could soon be released.

Last year, Liquid Telecom SA announced plans to establish a multibillion-rand 4G network in the country which would allow operators to roam using its 1 800MHz spectrum.

"There were two considerations for us: one was the economics and the other was timing," Motsa explained about the Liquid deal.

"We could predict when we did the 1 800MHz deal [with Liquid], we couldn't predict when minster Stella [Ndabeni-Abrahams] is going to release the spectrum. We could basically get clarity on the price that we could get with the Liquid deal, but we do now know what the real price would be for the Stella-spectrum," he said.

"The most important thing is we are in a spectrum crunch, and [MTN CTIO] Giovanni [Chiarelli] is crying for the spectrum, so anything we can get we want to get. But we are also still very interested in getting the high-demand spectrum from government because we believe the network needs that," Motsa clarified.

"If you forecast out the data traffic in the next five to 10 years, you are talking 10-times, 20-times the traffic. So if 40% of the base is using data and using say 1.5GB per month, if the base grows by 10% then the penetration grows to two-thirds and the consumption grows to 2GB to 3GB, you can imagine the demand," Shuter added.

"So we are going to need more spectrum down the line. The 1 800MHz band is a better band than the 2 600MHz the government is going to auction because it is easy to roam on, we are already using the frequencies, etc; so better a bird in the hand than two in the bush," Shuter said.

Liquid Telecom also has access to some 3.5GHz spectrum that is one of the bands which could be used for 5G. When asked if MTN was looking at a deal to use the 3.5GHz as well, Motsa said MTN would be interested but "the view is that our first choice is to get spectrum from the government, not from third-parties".

"Again, from a timing perspective we believed there was less pressure. We have also communicated to [the government] that it would make much more sense to license the 1 800MHz, 800MHz, 700MHz, 2 600MHz and 3.5GHz; we don't want to have to push the 3.5GHz aside, let's just add it into the list. But we also remain open to doing deals with partners if the conditions are right," Motsa added.

Bill bugs

When asked about the recent withdrawal of the Electronic Communications Amendment (ECA) Bill, Motsa said: "We really welcomed the withdrawal of the Bill, because we had said before that we had concerns about the Bill."

In February, Ndabeni-Abrahams withdrew the controversial ECA Bill after Parliament's portfolio committee on telecommunications and postal services held public hearings on the Bill in November. The Bill gave effect to the policy objectives set out in the National Integrated ICT Policy White Paper, published in late 2016. It contains provisions such as spectrum allocation, the wholesale open access network (WOAN) and rapid deployment policy.

"As to what is supposed to come out of the Bill, the minister has communicated to us that she is starting the process around issuing the high-demand spectrum and she has asked for our input, so we expect to be heard better than before and we expect a Bill that is actually investment-friendly and a Bill that makes sure we continue with infrastructure investments and which reduces prices," Motsa said.

"Most important for me in what to expect is timing. Time is not on our side and we are in a spectrum crunch so we hope to get the Bill done this year."

Last week, Ndabeni-Abrahams hinted of a government policy shift following the withdrawal of the Bill. According to the minister, the ECA Bill did not allow SA to reap the benefits promised by the fourth industrial revolution.

Like MTN, most South African telecommunications operators welcomed the withdrawal of the ECA Bill.

Shuter told journalists the Bill's withdrawal "has left space for policy direction to come, and the policy direction is clearly to move forward expeditiously with licensing the high-demand spectrum. So this is positive for us.

"I think at the same time, a lot of efforts have gone into make sure the industry is more customer-friendly, the [End-user and Subscriber Service Charter Amendment Regulation] has been implemented and we have had a big pricing transformation in SA, so I think a lot of the objectives of the earlier white paper and Bill have actually now already happened, just through the passage of time," Shuter explained.

In terms of the WOAN, which Motsa a year ago called "a terrible idea" that would create a monopoly, he said there is no clarity on what will happen once the Bill goes back to Parliament.

"We do not know where the WOAN is going to go. I've asked before who is going to fund the WOAN? Where are they going to get R1 billion to roll out their own network and pay for the spectrum?

"I don't have any information on the WOAN and we haven't heard anything about the WOAN. Our position on the WOAN is that we welcome the WOAN, but it must just compete like all of us."

Pricing transformation

ICASA's new end-user regulations came into effect at the beginning of March and have effectively put an end to automatic out-of-bundle (OOB) billing, and also allows users to rollover unused data and transfer data to users on the same network.

MTN once again confirmed it is compliant with the new regulations and Motsa said the telco has already seen a "serious decline" in the revenue which was previously coming from OOB billing, but has seen an increase in in-bundle data sales.

"Really what is happening is that a lot of customers who were using data in an OOB rate, that rate has come down a lot so that is helpful. And also now because you have to rebuy the bundle, a lot of that traffic is moving into the in-bundle sales. I think in a couple of quarters, we will be back to where we were but with a much healthier system," Shuter added.

He said MTN has been transforming its pricing strategy across almost all of its markets.

"There has been a big focus on SA because a lot of it was linked to a regulatory process but we have had dramatic reductions of OOB pricing in 19 of our 21 markets in 2018," he concluded.

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