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Telkom challenges Neotel-Vodacom decision

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Telkom yesterday filed an application at the North Gauteng High Court to set aside Icasa’s (Independent Communications Authority of South Africa’s) decision of 2 July that has given the regulatory go-ahead for the transfer of Neotel licenses to Vodacom.

Jacqui O’Sullivan, speaking for Telkom, states that the company has approached the court on a semi-urgent basis for an interim order to suspend the implementation of the Icasa decision, pending the resolution of the final review, as it is believes that the regulator has not adequately considered certain considerations when granting regulatory approval for the transaction. The regulator had previously been alerted to these considerations.

Telkom earlier participated in Icasa’s public process through a written submission as well as verbal submissions at the public hearings when the regulator invited public comments on the proposed transfer of control of Neotel’s spectrum licenses.

Telkom then made, among others, the following submissions to Icasa:

* Icasa does not have regulations in terms of section 13(1) of the ECA to deal with the transfer of control of individual licences;
* Icasa needed regulations in terms of section 13(3) of the ECA to adjudicate over the BBBEE implications of the proposed transfer of control;
* The regulations under which the applications were brought were not suitable for the purpose;
* The regulations in terms of section 31 (2A) of the ECA are a necessary condition for the transfer of control of Neotel’s high demand spectrum; and
* Icasa should consider promulgating the regulations referred to above prior to adjudicating over the transfer of control of spectrum licences.

As part of its earlier submissions, the company also spoke to the possible adverse impact on BBBEE and the effect on competition, according to O’Sullivan.
Telkom believes that Icasa should have closely considered the effect on competition and market structure of the transfer of control of spectrum licences, and imposed appropriate licence conditions to maintain a level playing field.

In addition, she says, the regulating authority was prompted to consider whether this transaction negates the objects of the Electronic Communications Act (ECA) in relation to BBBEE and if it did, to make an appropriate determination and/or impose appropriate licence conditions.

Two key issues arise from Telkom’s application:

* Was it lawful for ICASA, on 2 July 2015, to approve the transfer of control of Neotel’s radio frequency spectrum licence in favour of Vodacom in circumstances where effective from 1 April 2015, ICASA made regulations which provides that – ICASA “will not approve the assignment, ceding or transfer of control of a radio frequency spectrum licence if such transaction will not promote competition; or if such transfer will result in the reduction of equity ownership held by historically disadvantaged persons to be less than 30%”; and

* If the 2015 regulations did not apply to the merger application, was it lawful for ICASA to have considered and approved an application for the transfer of control of licences without ICASA having made the requisite regulations in which the relevant procedures and criteria are prescribed?

O’Sullivan states that Telkom is of the view that the regulator’s approval was premature. A transfer of control of spectrum licenses in the circumstances will be contrary to the values of accountability, responsiveness and openness which are fundamental values of our constitution.