Vodacom rivals say Neotel takeover would deal fatal blow to South African competition

Vodacom Group, a South Africa-headquartered mobile operator that is 65 per cent owned by Vodafone Group, will deliver a "fatal" blow to competition in its home market if regulators approve an acquisition of Internet service provider Neotel Pty, the country's third-largest mobile operator claimed.

Cell C Pty said a proposed ZAR7 billion (€503 million/$596 million) takeover of Neotel could kill competition in South Africa's communications market by creating a "super-dominant" operator that spans mobile and fixed-line services, in a statement to regulator the Independent Communications Authority of South Africa (ICASA), Bloomberg reported.

Cell C is now preparing to reiterate the sentiments in a regulator hearing that is scheduled to take place on Jan. 15 and 16. The operator's argument echoes that of other communication service providers (CSPs) in South Africa: namely that Vodacom would strengthen its hold on the market by gaining access to Neotel's wireless spectrum if the sale is approved. Cell C is also concerned that Vodacom would prevent CSPs leasing fibre capacity from Neotel in future.

Vodacom's rivals are calling on ICASA to reallocate Neotel's unused wireless spectrum amid concerns that approval of the acquisition would allow the operator to get a head start in deploying 4G (LTE) services in the market.

Competition in South Africa's mobile market intensified in 2014 as regulator-mandated cuts in mobile termination rates impacted operators' bottom lines. Vodacom, for example, blamed the termination rate cuts for a 5 per cent decline in net profit in six months to end-September 2014. Interconnection revenues declined 42.4 per cent year-on-year during the period, Vodacom Group CEO Shameel Joosub said.

Vodacom agreed to acquire Neotel from Indian operator Tata Communications in May 2014, in a move that mimicked its parent company's strategy of building up its fixed assets to expand its revenue streams.

Neotel is South Africa's second-largest fixed-line operator, and also has access to 2 x 12 MHz of 1800 MHz spectrum, 2 x 5 MHz of 800 MHz spectrum and 2 x 28 MHz of 3.5 GHz spectrum.

In addition to its wireless spectrum, Neotel has an extensive fibre network and enterprise capabilities. Vodacom said the acquisition would accelerate its fixed enterprise strategy and boost competition in South Africa's fixed telecoms sector.

For more:
- see this Bloomberg article

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