Telkom drops urgent interdict to stop auction of radio frequency spectrum

Telkom has withdrawn its urgent interdict to stop the regulator from auctioning radio frequency spectrum but is still challenging the auction process in court. The matter is expected to be heard in March, potentially further delaying the licensing procedure.

The fixed-line and mobile operator filed papers challenging the Independent Communications Authority of SA’s (Icasa’s) invitation to apply for a spectrum licence early this month. Its competitors, Rain, MTN and Vodacom, and the communications and digital technologies department opposed the litigation. 

Telkom said in a statement on Friday it had reached agreement with all the respondents on the need to expedite the hearing for Part B of Telkom’s two-part application. Part B deals with issues such as the terms of auction and the inclusion of the spectrum that is being used by broadcasters.

Part A, which it has withdrawn, challenged the proposal to start the auction process on March 22.

“In line with the agreement between the parties, while we await the decision of the court on the proposed timelines for the hearing of the review, Telkom will be removing the hearing of Part A of its application from the urgent roll,” said Dr Siyabonga Mahlangu,  Telkom’s group executive for regulatory and government relations.

Telkom reserved its rights to reinstate the matter on short notice should it become necessary, he said.

Part A of Telkom’s two-part application was set to be heard on January 25. The company has proposed that Part B be heard on March 1 to March 4 should the court be able to accommodate the request.

“Telkom is pleased with the co-operation it has received from the parties on this revised time frame and expects the regulator to proceed mindful that the outcome of hearing of Part B of Telkom’s application will have a material impact on the auction process,” Mahlangu said.

However, its rivals are preparing to oppose Part B of its court action.

Rain CEO Brandon Leigh said Telkom seeks to expedite the hearing of Part B of its application, after removing Part A, which deals with the interdict of the auction. “This is setting the stage for the auction to go ahead. Hence we have agreed to Telkom’s proposal.  We have filed our notice to oppose Part B of Telkom’s application as well.”

Vodacom Group CEO Shameel Joosub said: “The fact that the interdict has been removed we see as a positive, but we do think that Part B needs to be dealt with and we still want to get to a point where the auction can happen on time.

“We still think that the issues that are there on the ITA [invitation to apply] need to be dealt with as speedily as possible so the auction process doesn’t get held up. We are amenable to the proposal that Telkom has put forward, but every step in this regard is to make sure that we get the spectrum auction quicker and that SA can move forward,” he added.

Vodacom reiterated that it “remains committed to working with all industry stakeholders to realise a fair and successful spectrum auction process”. 

It said the “delays in the award of new spectrum has curbed the pace at which data prices could have fallen in SA and this impasse needs to be urgently resolved in the best interests of all South Africans”.

In Part B of the court papers Telkom criticised the structure of the spectrum auction and that it would limit it to acquiring just 42MHz, which would affect its ability to compete. It also objected to the inclusion of the spectrum band below 1GHz, which is still occupied by broadcasters, who are moving to digital platforms that will release that spectrum.

Rain explains that spectrum below the 1GHz bands is better at penetrating walls and other objects and it is important to build a national network. Spectrum bands above that frequency can carry more data and thus are important for building high-speed data networks such as 4G and 5G and also for networks in densely populated areas.  

In its opposing court papers, Rain said Telkom holds a total of 246MHz, far more than the other companies. The allocation includes the temporary spectrum that the regulator awarded to the mobile network operators at the outbreak of Covid-19. 

Telkom is “trying to preserve the competitive advantage its current superior spectrum holdings give it by obstructing the spectrum on specious grounds”, Rain says.

Commenting on Telkom’s concerns that it may be limited to acquire a certain amount of spectrum, Rain says that spectrum auctions contain one of more pro-competitive interventions because dominant companies have the ability to purchase a disproportionate amount of spectrum, giving them unfair competitive advantage.

A regulator may, for example, reserve valuable spectrum for non-dominant companies, which means that Vodacom and MTN may be prevented from taking part in the auctioning of some bands to give smaller companies a chance to acquire spectrum needed to compete with the two biggest companies. 

Rain said the auction design chosen by Icasa is not unusual internationally. 

After the proposed March 2022 auction, mobile network operators will be limited to 42MHz of sub-1GHz frequencies. In total, they will be limited to 187Mhz, including the sub-1GHz frequencies. 

Rain also said that Telkom doesn’t need 40MHz in the sub-1GHz spectrum as Vodacom and MTN have held 22MHz of that band for many years and this has been sufficient for them to build national networks.  

MTN echoes Rain's sentiments. MTN said Telkom is a beneficiary of a huge advantage as a result of regulatory and government intervention. It is the only mobile operator with permanent spectrum in some of the lucrative bands, giving it a permanent competitive advantage in its data offering, without relying on the temporary spectrum.  

“The state-sanctioned monopoly gave Telkom a significant head start in the rollout of fibre networks, and entrenched its dominant position. That is why today Telkom’s fibre ownership surpasses 160,000km ... some 10 times more than its nearest rival,” MTN said.

MTN says if Telkom is dissatisfied with the spectrum limits, it can return any part of its spectrum holding to optimise the opportunity to acquire more sub-1GHz. MTN said it had returned spectrum that it was not using.   

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