Why Neotel appeals to Vodacom and MTN

But ironically (and counter-intuitively), a full takeout by either Vodacom or MTN would be the best thing to ensure a more competitive telecommunications sector in the country.
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Obviously the sub 2.1GHz spectrum Neotel has access to, is first prize for any cellular network operator wanting to deploy LTE with fewer towers, but Neotel's fibre optic and corporate customers are simply a cherry on top for MTN/Vodacom, besides Neotel has performed very poorly in the consumer space and has not managed to gain any significant market share (mostly due to Neotel's crap choice of technology: CDMA), the spectrum is wasted on Neotel unless Neotel makes a decision to abandon CDMA and go for LTE instead.

IMHO the Competition Commission would be wise to stipulate that Neotel's fibre optic and corporate customers are not sold off, and that coporate part of Neotel remains when the dust settles, with the option of expanding into FTTC/FTTH in the consumer space.
 
I don't think that more spectrum for better LTE would make it more competitive. It will simply give the buyer of Neotel a few years headstart because the other operators will still havce to do with spectrum as it is now which will result in more managed market distortion. We all know hjow that works out in SA.
 
As I've said before - and nobody has rebutted - the spectrum access argument for Neotel acquisition doesn't make sense. The acquisition of Neotel by an existing licence holder as a separate licensed entity cannot take place because of the ECA ownership provisions and if Neotel is merged into an entity the spectrum allocations must be surrendered with the license. We don't have a secondary market for spectrum - - Sentech and Screamer.

The only business case for VC and MTN to gun for Neotel is to lock out Naspers from taking control of Neotel.
 
Ok,and probably did not comprehend but the last two posts have mentioned spectrum or should I say the word "spectrum" and this has me slightly confused with regards to the purchase of Neotel either for it's spectrum,fibre network or corporate customer base or whatever.But going back to spectrum, did Vodacom in the past not buy a stake in iBurst to gain access to it's "valuable" spectrum and if so would it make sense to go that route again in light of these challenges...

Paul Hjul said:
^ my big question is whether a MNO purchasing Neotel will actually get to keep the spectrum if they merge Neotel into their operations -
I was digging around the pairing of spectrum to IECNS licences (and discovered something amusing) and the frequency allocation regulations and ultimately it comes back to the Final Radio Frequency Spectrum Regulations

Regulation 10: Procedures in Respect of Transfers
(1)(a) Except with the approval of the Authority, no licensee must transfer a Radio Spectrum Licence
...
(7) The Authority will not approve the transfer of a spectrum licence
(b) If such transfer will reduce or limit competition
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This competition prohibition appears stricter than the requirements for merger approval with the Comp Comm. Meaning that Neotel will have to remain a separate spectrum holder to whoever buys it up as opposed to a merger and then ICASA can have a baby about ownership concentration.
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Then, if not for the spectrum then for what benefit? The much talked about Neotel fibre network?The one I have not seen/read much about of it's utilisation by Neotel itself? Then what?Makes no sense to me why the cellular giants would go for this or the article has not convinced me that it would make sense.

Just asking

From a confused fella.
 
siraman said:
I beg to differ,these two don't know the meaning of the word competition.But then that's my off-the-cuff response and will not be substantiated but suffice to say experience has taught me well.:D
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Have to agree with you. Voda and mtn and competition are words that do not mix. Now if cellc can get hold of it......mmmm
 
Paul Hjul said:
As I've said before - and nobody has rebutted - the spectrum access argument for Neotel acquisition doesn't make sense. The acquisition of Neotel by an existing licence holder as a separate licensed entity cannot take place because of the ECA ownership provisions and if Neotel is merged into an entity the spectrum allocations must be surrendered with the license. We don't have a secondary market for spectrum - - Sentech and Screamer.

The only business case for VC and MTN to gun for Neotel is to lock out Naspers from taking control of Neotel.
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:D Posted as I pressed submit.Anyway....Exactly!!! This does not make sense whatsoever...to me,I'm open to be convinced otherwise.
 
Paul Hjul said:
As I've said before - and nobody has rebutted - the spectrum access argument for Neotel acquisition doesn't make sense. The acquisition of Neotel by an existing licence holder as a separate licensed entity cannot take place because of the ECA ownership provisions and if Neotel is merged into an entity the spectrum allocations must be surrendered with the license. We don't have a secondary market for spectrum - - Sentech and Screamer.

The only business case for VC and MTN to gun for Neotel is to lock out Naspers from taking control of Neotel.
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You do have a compelling case against the transfer of spectrum in an outright firesale, but siraman pointed out that there is a loophole that Vodacom previously exploited with iBurst spectrum: instead of buying a majority/controlling shareholding in Neotel, MTN/Vodacom simply have to buy in with a significant minority shareholding which would allow negotiated access to the all important spectrum in an LTE joint venture (that's if the Competition Commission, ICASA and Dinosaurus Pule don't throw a spanner in the works).
 
I can't see this even getting past agreement on a price:

Neotel has 4 assets (corporate customers, fibre, spectrum, base stations) that they want money for but each has a problem - customers are fluid and could change and many are still Telkom customers too (duplicates), fibre is over-invested for their size and spectrum is possibly unusable. Sunk costs of their 200+ base stations (and some other hardware) costs a lot but who would pay for it?
 
siraman said:
I beg to differ,these two don't know the meaning of the word competition.But then that's my off-the-cuff response and will not be substantiated but suffice to say experience has taught me well.:D
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+1

MTN only knows how to operate in a cartel-like, protection-racketeering, wild-west type environment. Ditto Vodacom.
Competition is not in either company's DNA. These companies have gotten rich by charging the highest cell phone rates in the world, primarily on the poor.

It will not and should not survive regulatory scrutiny.

The article has a flaw in logic. If the assets of Neotel are so valuable and has profit potential, then why can't Neotel do it on its own? Raise the capital sans MTN/Voda?

Any approval must err on the side of increased competition. Perhaps the other company rumoured to be interest in Neotel, Internet Solutions, would inject the required competition?
 
j4ck455 said:
You do have a compelling case against the transfer of spectrum in an outright firesale, but siraman pointed out that there is a loophole that Vodacom previously exploited with iBurst spectrum: instead of buying a majority/controlling shareholding in Neotel, MTN/Vodacom simply have to buy in with a significant minority shareholding which would allow negotiated access to the all important spectrum in an LTE joint venture (that's if the Competition Commission, ICASA and Dinosaurus Pule don't throw a spanner in the works).
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Well here is the thing - Vodacom invested heavily in iBurst and then sold because of a regulatory fear concerning further spectrum allocations (which IIRC has actually evaporated) and used their position as a minority shareholder but iBurst was kept as a going concern. So yes I am damn certain that VC or MTN (or both) or Telkom or anybody else may acquire a minority stake in Neotel but when you want a stake that is big enough the ownership of an IECNS licence holder issue with ICASA comes up and they can't transfer the spectrum so you are sitting with a limited value proposition on the spectrum front. VC for example could acquire a chunk of Neotel and invest in building a Neotel run LTE network which Vodacom has access to but then the non-discriminatory access issues come into play - - a roaming on Neotel LTE would certainly be possible to make exclusively (8ta on MTN) but then Neotel still has to be kept as a going concern and keeping other shareholders from pushing the envelope always exists. In any event such a strategy does not amount to having access to "valuable spectrum" it is a course of building a collaborative competitor but a competitor none the less.

Direct access to the spectrum - spectrum sharing and the like - is a minefield which needs to be sorted out before there is value this sort of acquisition from a spectrum point of view. From the perspective of keeping another entrant into the LTE space - one with deep pockets - it makes perfect sense and if the regulatory reviews go the way of the MNOs then the profits can come in.
 
Paul Hjul said:
VC for example could acquire a chunk of Neotel and invest in building a Neotel run LTE network which Vodacom has access to but then the non-discriminatory access issues come into play - - a roaming on Neotel LTE would certainly be possible to make exclusively (8ta on MTN) but then Neotel still has to be kept as a going concern and keeping other shareholders from pushing the envelope always exists. In any event such a strategy does not amount to having access to "valuable spectrum" it is a course of building a collaborative competitor but a competitor none the less.

Direct access to the spectrum - spectrum sharing and the like - is a minefield which needs to be sorted out before there is value this sort of acquisition from a spectrum point of view. From the perspective of keeping another entrant into the LTE space - one with deep pockets - it makes perfect sense and if the regulatory reviews go the way of the MNOs then the profits can come in.
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In an ideal world, we could have the open access LTE network model (that has been touted by many from ICASA at the LLU hearings to AKC), where spectrum is pooled to make one LTE network with a multitude of retail competitors.

ICASA should be driving an open access LTE network model and forcing competitors to work together at the wholesale network operations level, but I think ICASA only has eyes for the revenue (and huge bonuses) to be gained from a UK-style spectrum auction.
 
An open access LTE network model is in CellC's interest. I am not convinced that ICASA has - or should have - the jurisdiction or power to enforce an open access LTE network. Moreover historically the selection of the correct major network technology is a process of "natural selection" - imagine if ICASA had imposed CDMA 2000 EVDO as an open access network on South Africa. An open access LTE network model is not necessarily in VC or MTNs interest and it probably is in Telkom's interests for the "wireless loop" to be unbundled as well. I think we need to avoid approaches which undermine the ECA (and any approach necessitating its amendment falls into this scope) or abandons the free market ideal. Looking at LLU I am probably a broken grammarphone in saying - implement and ENFORCE the damn legislation and existing regulations and let the market forces kick in, full out LLU and its benefits will follow. The same case applies to the wholesale open access wireless network situation, except that the network is a network not a set of facilities.

Neotel does have a unique opportunity to be the kernel of a wholesale open access LTE network and this would be a good thing (notwithstanding the reservations stated above) for a national LTE open access network to come into being. However the case is not one of mutual exclusivity an open access LTE network can exist side by side with providers building their own network. Just remember an open access network means all IECNS and IECS licence holders can use it (the IECS guys might have a harder time and be dependent on ECNS) and so Naspers enters the equation.

If there is truth in the suggestions of Telkom unbundling their legacy copper network into an SPV then we really could see a future where there is two core last mile technologies available to service providers for the provisioning of internet services.
 
Neotel can go for all the difference it made. We were promised a fixed line operator but just got another mobile wannabe.
 
Paul Hjul said:
An open access LTE network model is in CellC's interest. I am not convinced that ICASA has - or should have - the jurisdiction or power to enforce an open access LTE network. Moreover historically the selection of the correct major network technology is a process of "natural selection" - imagine if ICASA had imposed CDMA 2000 EVDO as an open access network on South Africa. An open access LTE network model is not necessarily in VC or MTNs interest and it probably is in Telkom's interests for the "wireless loop" to be unbundled as well. I think we need to avoid approaches which undermine the ECA (and any approach necessitating its amendment falls into this scope) or abandons the free market ideal. Looking at LLU I am probably a broken grammarphone in saying - implement and ENFORCE the damn legislation and existing regulations and let the market forces kick in, full out LLU and its benefits will follow. The same case applies to the wholesale open access wireless network situation, except that the network is a network not a set of facilities.
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The way it could work, is ICASA should allocate a large block of spectrum to an open access legal entity and then let the interested parties decide on the inner workings of the network amongst themselves, it should not take long for the incumbent network operators to realise that they can keep costs down by collectively applying leverage on LTE vendors.

Unfortunately all of this has idealistic Scotch Mist as its foundation, but fast forward 25 years and it is hard to justify having numerous competing networks when spectrum is such a contended resource. It would be better to sort out the wholesale realm now and let market forces drive and define competition in the realm of retail.
 
Hmm, I get the appeal from VC and MTN -> infrastructure+clients+spectrum+base stations, but what happened to Didata/IS looking at buying Neotel? To me that could be very interesting, they are big enough to make an impact in this space and it would fit right in with their customer base and unified comms plans.
 
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