Vodacom’s relationship with Rain under scrutiny

Vodacom’s relationship with Rain is under investigation, with allegations that Rain lets Vodacom use its spectrum for financial gain.

The investigation follows complaints from Cell C and MTN to ICASA and the Competition Commission regarding the Vodacom-Rain deal.

Under scrutiny is the use of Rain’s 1,800MHz and 2,600MHz spectrum, which can give Vodacom an advantage over its competitors.

Cell C told MyBroadband that Vodacom may be unlawfully accessing Rain’s spectrum and offering access to infrastructure and facilities on a discriminatory basis.

Another concern is that Vodacom may receive an unfair advantage through its relationship with Rain.

Operators like MTN and Cell C are further concerned they will not receive an equally-beneficial deal from Rain, when compared to Vodacom’s agreement with the company.

Industry sources told MyBroadband that preliminary findings by ICASA raise several questions regarding the Vodacom-Rain deal.

Big concerns

The concerns raised by industry players include:

  • Vodacom may be unlawfully accessing Rain’s spectrum, and offering access to infrastructure on a discriminatory basis.
  • Vodacom is essentially running Rain’s network and radio planning, meaning Rain’s network is constructed to address data demand from Vodacom customers.
  • It is not a true roaming agreement – Rain’s spectrum is used by Vodacom subscribers, even when Vodacom has good coverage in the area.
  • There is no indication a Vodacom customer is roaming on Rain’s network, even when using Rain’s spectrum.
  • Other operators will not get the same benefits as Vodacom from Rain.
  • Rain is not a true mobile operator, but an investment company using Vodacom to monetise its spectrum assets.

Vodacom and Rain have strongly denied these allegations, stating their commercial relationships are above board and legal.

Vodacom responds

Vodacom said it has cooperated fully with ICASA and the Competition Commission in their investigations.

“Despite any insinuations or allegations to the contrary, Vodacom’s position is that its relationship with Rain is not unlawful or anti-competitive.”

“Roaming arrangements are not unique to South Africa or to Vodacom and are commonly accepted and practiced in our market.”

Vodacom said its roaming agreement with Rain is non-exclusive, meaning its competitors can also conclude roaming agreements with Rain.

“Both investigations are still open and it is therefore inappropriate for us to provide further comment at this stage.”

Rain responds

Rain CEO Duncan Simpson-Craib said they went through a thorough legal process to ensure they were 100% within the relevant regulations.

Rain dismissed allegations that Vodacom is running its network and radio planning, as this is done in-house to deliver coverage to as many potential customers as quickly as possible.

It also denied allegations that its network rollout is linked to where Vodacom has a lot of demand for data.

“Rain is a demand-driven organisation and the sole decision maker with regard to our network rollout,” it said.

The densest part of all the network is where demand is greatest, so many of the sites Rain uses will be the same as those used by Vodacom, it said.

Rain stated that Vodacom customers are not using its spectrum. Instead, in areas where Vodacom roams on Rain’s network, Vodacom customers’ communications are carried on Rain’s access network.

“In the context of any roaming arrangement – like Cell C on Vodacom or Telkom on MTN – subscribers are not aware when they are roaming,” said Rain.

Rain said it is seeking other operators to roam on its network, and hopes to “reach agreements in the near future”.

Funding

Rain further denied the allegation that it is an investment company which is using Vodacom to monetise its spectrum.

“Vodacom is definitely not funding and building Rain’s network,” it said.

“We are currently building and expanding our business, initially through the Internet Solutions channel, which enables ISPs to sell fixed-wireless broadband packages on Rain’s network.”

“In addition, we have brought across thousands of iBurst customers onto our LTE-A network.”

Rain added that it will launch retail mobile services when its network coverage reaches the required levels.

“We have recently raised capital and brought in African Rainbow Capital as an equity partner for this exact reason.”

Rain director Michael Jordaan added that they believe in “playing the ball, not the man”.

“We will compete fairly in the market, rather than using obstructive legal tactics to prevent legitimate competition in the market, where the only losers will be the consumers,” said Jordaan.

Now read: Why Cell C wants Vodacom’s LTE deal with Multisource investigated

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Vodacom’s relationship with Rain under scrutiny