Cellular2.09.2024

Why Cell C didn’t pay R288 million for spectrum it won at auction

Cell C has confirmed that it did not secure the radio frequency spectrum it won in the 2022 auction.

Cell C CEO Jorge Mendes told MyBroadband this was because a payment arrangement the operator had with the Independent Communications Authority of South Africa (Icasa) fell through.

“We paid a deposit, and the intention was to get that spectrum,” Mendes said.

“There was a payment arrangement. However, between the changes that took place at Cell C and the changes that took place at the regulator, this thing was lost in translation.”

The auction and payment plan predate Mendes’ appointment as Cell C CEO on 1 July 2023.

“When I resurfaced that conversation to ask if we’re still good with our payment plan, a decision had already been made by the regulator that the spectrum go back into the pool,” Mendes said.

Reports that Cell C hadn’t settled its spectrum auction bill first emerged in October last year when a Department of Communications and Digital Technologies official publicly mentioned it.

The company has been struggling financially, so it wasn’t surprising that it couldn’t raise the R288 million it had bid on 10MHz of spectrum in the 3,500MHz band.

However, Mendes had previously assured they were in dialogue with the regulator regarding a payment plan.

News that Cell C forfeited the spectrum came in May this year via the footnotes of an affidavit by Vodacom regulatory affairs executive Andrew Barendse, which was filed as part of an unrelated court case.

Vodacom is suing Icasa for approving certain spectrum pooling deals between MTN and other network operators, and Cell C’s spectrum affairs came up as part of that.

The news came as a surprise as Cell C executives said as recently as February that they were in a position to settle their debt to Icasa.

Cell C said it had paid some of the amount and was in discussions with Icasa about settling the balance. It did not reveal how much the deposit was.

Icasa’s March 2022 auction involved a significant amount of high-demand radio frequency spectrum.

Spectrum is a critical resource for any mobile network operator. It represents the raw bandwidth at their disposal to transmit data between their towers and cellular devices.

Vodacom and MTN bought the most spectrum at the auction.

Vodacom bid almost R5.4 billion to acquire 110MHz of bandwidth across three frequency bands, with 80MHz concentrated in the IMT2600 band.

MTN bid nearly R5.2 billion for 100MHz spread over the IMT800, IMT2600, and IMT3500 bands.

Telkom bid R2.2 billion for 42MHz, and Rain R1.4 billion for 40MHz of bandwidth.

Cell C bid second least, offering R288.2 million for 10MHz in the IMT3500 band. Liquid bid R111 million for an extra 4MHz in IMT3500.

Jorge Mendes, Cell C CEO

While the original payment plan fell through, Mendes said they still hope to secure the spectrum through a different process.

“We are dealing with it in another way now. For all intents and purposes, the spectrum is back in the pool. It isn’t ours,” he said.

“We triggered a different process to see how we can bid for that same spectrum. We do want the asset,” said Mendes.

Mendes was circumspect in his answers about the new process Cell C was following to secure the spectrum.

When asked about it, he said, “We have been guided on what the approach should be by the new chairman of the regulator.”

The new chairman is Mothibi Ramusi. He was appointed chairman of Icasa on a five-year contract in April.

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