Picture: REUTERS
Picture: REUTERS

VODACOM has remained mum about the details of its revised structure of its bid for Neotel. The revised deal has raised questions as to what Vodacom is buying and how it will benefit from the transaction.

Last year, Vodacom announced it would abandon its bid to buy the entire Neotel for R7bn, after strong criticism from rivals, and would instead buy the fixed-line assets of Neotel.

This will leave Neotel with its sought-after radio frequency spectrum that it will make available to mobile network operators including Vodacom, via a commercial arrangement.

The parties appeared before the Competition Tribunal last month to discuss the revised structure of the deal. The details have not been made public, but it is understood that the hearings centred on what exactly the revised deal entails.

Vodacom spokesman Tshepo Ramodibe said the group was committed to renotifying the Competition Commission about the restructured deal as soon as possible.

Mr Ramodibe said the roaming offer had not been made to other network operators.

Competition Commission spokesman Itumeleng Lesofe said: "The process going forward will depend on how the revised deal is structured. However, there is a general understanding that the commission will conduct an investigation once the revised deal has been filed."

This may further delay the deal, which was mooted in 2014. Neotel owns about 17,000km of fibre network nationally.

It offers voice services, managed services and value-added services, including video conferencing and telepresence, and hosted business applications.

Vodacom CEO Shameel Joosub has previously said the deal will enhance its fixed-line operations and fast-track the roll-out of its wireless long-term evolution (LTE) or 4G network.

Africa Analysis MD Dobek Pater said Neotel had always claimed that it was not a mobile, but only a fixed-line operator. Even its wireless network infrastructure has always been referred to as fixed wireless.

Therefore, by this definition all of its assets are fixed, even the wireless infrastructure — code division multiple access, WiMAX, and LTE.

"Would Vodacom acquire the fixed wireless assets as well? Therefore, effectively, all components of the Neotel network," he said. "Moreover, if Vodacom acquires the entire fixed-line assets of Neotel, where does that leave Neotel? Is it then only a ‘shell’ housing various licences? It also leaves the Tata shareholding in a precarious position. What does Tata plan to do?"

Speculation is that the proposed spectrum roaming could likely be stringent for rivals and resulting in Vodacom having access to all of it.

BMI-TechKnowledge director Brian Neilson said that a roaming agreement with Neotel that did not prejudice the other operators was not a bad business option and could circumvent the whole regulatory challenge.

Although there are existing network roaming agreements between mobile operators, which are treated as commercial arrangements, the regulator has been urged to start looking at wholesale partnerships.

Mr Neilson said it would be meaningless if Independent Communications Authority of SA (Icasa) did not intervene in setting the wholesale prices for such roaming agreements.

There have been a number of cases in Europe where the number of operators has shrunk through mergers and acquisitions, and one of the conditions imposed by the authorities for these deals to go through has been compulsory opening up of their facilities to other operators, either through roaming or mobile virtual network operator agreements.

"The wholesale prices of such facilities-leasing arrangements are then regulated by the authority — just as, for instance, our mobile termination rates are regulated in SA," he said.

However, in cases where there was evidence of an operator acting uncompetitively through artificially high wholesale prices, where the operator was in a position to materially influence the market, then Icasa needed to step in and consider wholesale price regulation, said Mr Pater.