Telkom doubles down
Telkom has informed shareholders that it will continue its legal fight against the Independent Communications Authority of South Africa (Icasa) over its spectrum auction.
Icasa concluded its spectrum auction on 17 March 2022, with South Africa’s mobile network operators pledging R14.4 billion to acquire new radio frequency spectrum.
Spectrum is the raw network capacity mobile operators use to communicate between their towers and cellular devices.
“Whilst Telkom has been able to secure the much-needed sub–1 GHz in the spectrum auction, we were constrained in our ability to acquire the amount of spectrum that we need to compete effectively,” Telkom stated.
“To secure its ability to compete effectively in the mobile market, Telkom persists with its court application to ensure that the licensing of spectrum promotes effective competition in the mobile market”.
The hearing is set down for 11–14 April 2022.
Telkom said the court’s findings “may impact the auction and its outcome.”
The partially state-owned operator omitted from its shareholder announcement that it has asked the court to invalidate the auction.
Telkom wants Icasa to return to the drawing board and restart the licensing process leading up to the auction.
This includes public consultations and issuing a draft invitation to apply on which interested parties can comment.
Ellipsis Regulatory Solutions founder Dominic Cull said a Telkom victory would delay the release of additional spectrum by at least 15–18 months.
| Telkom spectrum auction acquisitions | ||||
|---|---|---|---|---|
| Spectrum | Frequency bands | Acquisition cost | Auction fee due in 30 working days | Outstanding fee – due after 1 July 2022 |
| 800MHz | 20MHz | R1,504,815,407.10 | R532,704,654.12 | R972,110,752.99 |
| 3500MHz | 22MHz | R608,800,000.00 | R608,800,000.00 | — |
| Total | R2,113,615,407.10 | R1,141,504,654.12 | R972,110,752.99 | |
Telkom said it Icasa confirmed its auction fee is due within 30 working days.
“The auction fee due is the full amount relating to 3500MHz and the proportional payment for 800MHz that is immediately available,” Telkom stated.
It obtained 20MHz of 800MHz and 22MHz of 3500MHz for R2.1 billion in the auction.
“Icasa will communicate an update on the full availability of the 800MHz, after 1 July 2022,” said Telkom.
Telkom advised shareholders that it expects to make the R1.1 billion payment in the current financial year, which will impact the current year’s debt level, capital expenditure, and free cash flow.
“Telkom year-to-date free cash flow is in negative territory, tracking below its expectations,” the company reported.
“Notwithstanding the financial impact, Telkom has adequate capacity on its balance sheet to fund the spectrum while maintaining sufficient headroom of its loan covenants.”
Telkom said the long-term strategic benefits of the spectrum acquisition outweigh the short-term financial impact.
“Since inception, Telkom Mobile has not owned sub–1 GHz spectrum,” explained Telkom.
“The 20MHz of 800MHz, once available, will enable more efficient network deployment, increased coverage, and capacity on the mobility layer resulting in improved user throughput and experience, particularly in rural areas.”
Telkom said it already leads the market with its fixed wireless access service.
“The acquisition of 22MHz of 3500MHz will enable us to advance an enhanced 5G position through combining our existing 28MHz of 3500MHz to achieve a total of 50MHz contiguous spectrum in this band.”
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