Real reason Telkom is fighting against the spectrum auction — and it is not surprising

Telkom CEO Sipho Maseko has revealed that they are fighting against the spectrum auction in its current format because they will bid and pay for sub-1GHz spectrum which they cannot use.

Vodacom and MTN, in comparison, will be able to use the additional spectrum they get through the auction. This, Maseko said, will create an “uneven and unequal playing field”.

The Independent Communications Authority of South Africa (ICASA) planned to hold its long-awaited auction of high-demand spectrum by 31 March 2021.

The auction was delayed after Telkom obtained an interdict against ICASA which stops it from taking place until the case is heard by the High Court in Pretoria.

Telkom said the spectrum auction in its current format will “mess up the industry for 20 years” and that there are “a number of grounds of review”.

This includes that the “digital dividend” spectrum in the 700MHz and 800MHz bands are not currently commercially viable.

Telkom also argues that ICASA has not considered the lack of competition in South Africa’s cellular market in its spectrum auction plans.

Industry players, including Vodacom CEO Shameel Joosub and Liquid Intelligent Technologies SA CEO Deon Geyser, have slated this delay.

Joosub said Telkom’s legal challenge is a delaying tactic that is holding back South Africa’s mobile network operators from providing better and cheaper broadband access.

“I think people are playing games. I think it’s important that we put this behind us and actually do what’s best for the country for a change,” Joosub said.

Geyser said the spectrum assets government holds should be used by the telecommunications industry.

“South Africa is already ten years behind on high-demand spectrum for 4G. To delay that further is not great for the country,” he said.

Telkom CEO Sipho Maseko
Telkom CEO Sipho Maseko

However, Maseko is unapologetic about delaying the high-demand spectrum auction.

Speaking to The Money Show’s Bruce Whitfield, Maseko said they did not start the dispute around the spectrum auction by rushing to the courts.

“We made various attempts to find a more rational, logical way forward. The closing date for the ITAs [Invitations to Apply] was 28 December 2020. Right up until the day before that I was criss-crossing this town trying to engage different policymakers in terms of the pitfalls that were captured in the ITA,” he said.

After they were unsuccessful in trying to resolve the issue through discussions, Telkom launched a legal challenge against the auction.

Maseko said the current auction structure means Telkom would have to bid for sub-1GHz spectrum, and pay billions for it, only to find that it is not commercially available to use.

“My shareholders would murder me if I bought something which I can’t commercialise,” he said.

He highlighted that the government has not met any of its previous digital migration deadlines to free up the sub-1GHz spectrum.

“There is no reason to believe the new deadline will be met. We are still way behind in terms of digital migration,” Maseko said.

“If we have gone and bid for it [sub-1GHz spectrum] and secured it, we will be stranded with spectrum we can’t use, and our competitors [Vodacom and MTN] would have spectrum that they can use,” he said.

He said this will further widen the structural gap between Telkom and its main competitors, Vodacom and MTN. “That makes for an uneven and unequal playing field,” Maseko said.

To understand why Telkom is content with delaying the spectrum auction, and why Vodacom and MTN are keen to get it done, you only have to look at how much spectrum each operator has.

Telkom currently has 150MHz of spectrum it can use to provide mobile data products. Vodacom, MTN, and Cell C, in comparison, only have 76MHz.

Telkom has previously promoted the fact that they have more spectrum than other mobile operators as a competitive advantage.

The longer the spectrum auction is delayed, the longer Telkom will maintain this competitive advantage.

Not getting additional spectrum will also make it more difficult for Vodacom and MTN to cut mobile data prices, which again benefits Telkom.

The table below provides an overview of the current spectrum assets held by the four large mobile operators.

Mobile Spectrum
Spectrum Band Vodacom MTN Cell C Telkom
900Mhz 22MHz 22MHz 22MHz
1,800MHz 24MHz 24MHz 24MHz 24MHz
2,100MHz 30MHz 30MHz 30MHz 30MHz
2,300MHz 68MHz
2,600MHz
3,500MHz 28MHz
Total 76MHz 76MHz 76MHz 150MHz

There are concerns that Telkom’s court challenge will result in a drawn-out legal process which can delay the spectrum for years.

The country can ill-afford this delay as additional spectrum is desperately needed to cope with the growing demand for mobile data.

There is some good news in this regard. Maseko said Telkom has been approached by ICASA to participate in an out-of-court settlement, to which they agreed.

“We will wait for them to reach out to us to see what is possible,” Maseko said.

“If we don’t go that route, the matter will most likely be in court in July or August, and who knows how long the court process will take.”

Now read: Telkom’s spectrum auction challenge a weak delaying tactic – Vodacom CEO

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Real reason Telkom is fighting against the spectrum auction — and it is not surprising