South Africa to Provide Broadband Spectrum to Smaller Telecom Operators

(Bloomberg) -- Vodacom Group Ltd. and MTN Group Ltd.’s long wait for the auction of new spectrum in their home market of South Africa is set to continue after the government made clear the priority is to increase opportunities for smaller companies.

The telecommunications ministry said Friday that more than 400 operators with no access to spectrum should be allowed to use a wireless open access network, or WOAN, to boost competition and lower communication costs. That may push back allocation for the two market leaders by as many as two years, according to Dominic Cull, a telecommunications regulatory lawyer at Cape Town-based Ellipsis Regulatory Solutions.

“The problem is that the implementation of the WOAN, and getting applications in for licenses could delay the actual spectrum auction by another year or two,” he said by phone.

Vodacom and MTN say they need new spectrum to continue rolling out broadband in the country and reduce data prices. They were told by a competition regulator in April to reduce charges anyway, which led to Vodacom reporting a fall in first-quarter South African revenue on Thursday.

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The Johannesburg-based company said it will review the WOAN document and comment in due course. Vodacom’s shares have declined 13% this year, while MTN, which is more exposed to other markets, has gained 20%.

“The confirmed plan for a WOAN in South Africa dashes Vodacom’s hopes for quick access to spectrum to cut costs and widen service availability,” John Davies, an analyst at Bloomberg Intelligence, said in a note. “The WOAN and auction design will take time and mean that spectrum available to large incumbents Vodacom and MTN will be limited and relatively expensive.”

The spectrum auction was last formally set for early 2017, but postponed due to a dispute over the process between the government and the industry regulator, known as Icasa.

Businesses will need to apply for licenses to be part of the WOAN, and only then will spectrum be allocated to them with reduced fees. The policy aims to allow entry to smaller operators unable to compete for spectrum against the big operators.

To contact the reporter on this story: Loni Prinsloo in Johannesburg at lprinsloo3@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, John Bowker, Hilton Shone

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