Telkom’s fight against the Vodacom-Neotel deal

On 16 July Telkom filed an application in the North Gauteng High Court to set aside Icasa’s decision to give the regulatory go-ahead for the transfer of Neotel licences to Vodacom.

Telkom approached the court for an interim order to suspend the implementation of the Icasa decision, pending the resolution of the final review.

“We believe that the regulator has not adequately considered certain considerations when granting regulatory approval for the transaction,” said Telkom.

Telkom participated in Icasa’s public process through a written submission as well as verbal submissions at the public hearings when the regulator invited public comments on the proposed transfer of control of Neotel’s spectrum licences.

Telkom made the following submissions to Icasa:

• Icasa does not have regulations in terms of section 13(1) of the ECA to deal with the transfer of control of individual licences.
• Icasa needed regulations in terms of section 13(3) of the ECA to adjudicate over the BBBEE implications of the proposed transfer of control.
• The regulations under which the applications were brought were not suitable for the purpose.
• The regulations in terms of section 31 (2A) of the ECA are a necessary condition for the transfer of control of Neotel’s high-demand spectrum.
• Icasa should consider promulgating the regulations referred to above prior to adjudicating over the transfer of control of spectrum licences.

As part of its earlier submissions, Telkom spoke to the possible adverse impact on BBBEE and the effect on competition.

Telkom believes Icasa should have considered the effect on competition and market structure of the transfer of control of spectrum licences, and imposed appropriate licence conditions to maintain a level playing field.

In addition, Icasa was prompted to consider whether the transaction negates the objects of the ECA in relation to BBBEE, and if it did, to make an appropriate determination and/or impose appropriate licence conditions.

Two key issues arise from Telkom’s application:

• Was it lawful for Icasa to approve the transfer of control of Neotel’s radio frequency spectrum licence in favour of Vodacom in circumstances where effective from 1 April 2015, Icasa made regulations which provides that – Icasa will not approve the assignment, ceding or transfer of control of a radio frequency spectrum licence if such transaction will not promote competition; or if such transfer will result in the reduction of equity ownership held by historically-disadvantaged persons to be less than 30%.
• If the 2015 regulations did not apply to the merger application, was it lawful for Icasa to have considered and approved an application for the transfer of control of licences without Icasa having made the requisite regulations in which the relevant procedures and criteria are prescribed?

Telkom said it is of the view that the regulator’s approval was premature. A transfer of control of spectrum licenses in the circumstances will be contrary to the values of accountability, responsiveness, and openness which are fundamental values of our constitution.

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