You can’t have it both ways, Vodafone
UK parent’s antimerger logic holds true in South Africa too
Spectrum is scarce and must be carefully managed by the state
IN a recent interview with the Financial Times, Jeroen Hoencamp, CEO of Vodafone UK, highlighted Vodafone’s concerns regarding a proposed merger between BT Group (the dominant fixedline operator in the UK) and mobile operator EE.
According to the article, Hoencamp wants the British regulator to force BT to relinquish spectrum needed for mobile services.
We find it interesting that Vodafone has taken this stance in a country where it is the third-largest mobile operator by market share. But in South Africa, where it is the dominant mobile operator, Vodafone — through its South African subsidiary, Vodacom — has taken the complete opposite stance on a similar deal.
Vodacom and Neotel have downplayed their potential merger and the transfer of spectrum that this could entail. As Cell C has previously said, this will set the South African telecoms industry back 20 years, by reinforcing an already dominant player and reducing competition. It seems Vodafone agrees — but only when it suits the company’s own competitive agenda.
Radio frequency spectrum is what mobile networks use to transmit voice and data. Spectrum is a limited, stateowned resource. In the same way that you can only build a set number of roads over any given piece of land, you can only carry so much traffic over a frequency band. Further, if it is broken up into tiny bits it becomes unusable, so spectrum can only be allocated to a limited number of companies to use to provide communications services.
Because spectrum is a scarce resource, it is valuable and must be carefully managed by the state to ensure that it is used in a way that will most benefit the country as a whole. This is covered in the Electronic Communications Act.
What Vodafone, through Vodacom, is trying to do in South Africa is use a commercial transaction to take over Neotel’s spectrum, when this spectrum should be handed back to the state to allocate effectively — and for all telecommunications players to compete for.
Hoencamp, in his argument in the Financial Times, believes that allowing BT access to that spectrum would effectively create a superdominant player and undermine the sustainable growth of Vodafone in the UK.
The irony is that it seems Hoencamp has taken Cell C’s arguments verbatim to argue Vodafone’s points in the UK, while Vodacom’s CEO has taken the opposite stance in South Africa.
Allowing Vodacom to acquire this spectrum in this way would only entrench its dominant position.
This will result in less competition in the market, and, as Vodacom has no reason to play nicely with its competitors or consumers, it will likely result in higher prices, because no other operator will be able to put enough pressure on Vodacom to reduce prices through competition.
Cell C believes Neotel’s spectrum should be returned to the national plan and be allocated in a fair, transparent and inclusive process that gives all operators a fair chance to acquire it.
This is also what the Vodafone UK CEO called for in the proposed transaction between BT and EE.
In addition to spectrum, Neotel also owns and maintains a fibre network that is used by other local operators to transmit voice and data between base stations. After the proposed merger, this fibre would be controlled by Vodacom, which no doubt would make it as difficult as possible for its competitors to access at a fair price.
In acquiring Neotel, Vodacom would gain access to two scare resources — spectrum and a fibre network — that would allow it to increase its lead in the market to the detriment of the market and the consumers it serves in the long term.
Cell C believes that the Independent Communications Authority of South Africa and the Competition Commission should not approve the proposed merger and that Icasa should rather take steps to improve competition in the market.
It is only when all operators can fairly compete on price and service that all South Africans will have a chance to access the best possible broadband quality at the most affordable prices.