Telkom is accused of putting its own interests ahead of South Africa

Telkom is accused of putting its own interests ahead of South Africa regarding spectrum and mobile data prices. Senior telecoms executives, who spoke to MyBroadband on the condition of anonymity, said Telkom’s fight against the planned spectrum auction is nothing more than a delaying tactic. They said Telkom’s “secret plan” is to keep spectrum out of the hands of Vodacom and MTN to prevent a further decline in mobile data prices.

The executives argued that Telkom is achieving this goal in various ways – creating confusion around the spectrum auction, launching legal challenges, and trying to stall the regulator.

Both Vodacom and MTN have said additional spectrum will result in a big decline in data prices – something which the execs said Telkom wants to prevent.

They argued that Telkom’s main competitive advantage in the mobile market is its competitive data pricing. With a large debt burden and the need to maintain good margins, rapidly declining mobile data prices pose a risk to Telkom.

It will remove the company’s main value proposition and force it to compete on network quality and service levels – areas where it is lagging Vodacom and MTN.

Telkom is hanging its hat on its mobile operations for future growth. It is therefore logical for the company to protect its mobile unit against future risks, which may include a spectrum auction.

Telkom allegedly even boasted about delaying the spectrum auction at a recent investor event. As it has more spectrum and fewer subscribers than Vodacom and MTN, the spectrum auction delay puts it in a stronger position for future growth.
The comments from the telecoms executives followed Telkom obtaining an interdict to stop the auction of high-demand spectrum until its case is heard in full by the high court in Pretoria.

The interdict prevents ICASA from processing or deciding on any spectrum applications as part of its invitation to apply (ITA) issued earlier this year.

The closing date for spectrum applications related to the planned wholesale open-access network (WOAN) has also been temporarily suspended as a result of this interdict. Telkom argued the “digital dividend” bands of spectrum in the 700MHz and 800MHz categories are not currently commercially viable.

This is because broadcasters like MultiChoice, e.tv, and the SABC are still using those frequency bands for terrestrial television signals.

Telkom added that the regulator has not taken the lack of competition in South Africa’s cellular market into account as part of its spectrum auction. It is nothing new for Telkom to fight against competition. Telkom have used regulatory and legal challenges for over two decades to keep competition at bay.

This tactic, however, does not mean that Telkom doesn’t have a point. ICASA’s spectrum allocation process document contains many contentious points.

MTN, for example, challenged ICASA’s decision to classify spectrum applicants as Tier 1 and Tier 2, and then excluded Tier 1 applicants from a part of the spectrum auction. The big difference between Telkom and MTN’s legal action is that MTN does not want to delay the spectrum auction.

Instead, MTN’s preference would be to have the auction proceed as scheduled, but without the operator classification and opt-in scheme. World Wide Worx CEO Arthur Goldstuck said ICASA’s spectrum allocation process document is far from flawless. He highlighted that the process doesn’t open the way to competition and does not create an equal playing field.

Goldstuck, however, added that Telkom and the government have held back the broadband industry in South Africa for 25 years. Wanting to protect the next 20 years while ignoring the ills of the last 25 years is a little disingenuous,” he said.

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