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Cape Town - The battle for the internet in South Africa took a dramatic turn on Thursday as telecoms giants took swings at each other.
Vodacom faces objections from Cell C and MTN over its plans to acquire Neotel from Tata Communications. But South Africa's dominant mobile operator, Vodacom, spared no punches as it made its case in public hearings.
The debate centres on accusations that it should not be allowed to purchase the frequency spectrum assigned to Neotel.
"Yes, the deal may make life tougher for our competitors - particularly Telkom - because they will need to raise their game to compete with the merged Vodacom-Neotel," said Vodacom CEO Shameel Joosub.
If the R7bn deal gets the go-ahead, it should allow Vodacom to accelerate the delivery of higher speed LTE (Long Term Evolution) broadband services as well as the roll-out of fibre to the home (FTTH) services.
Competition
It implies that Vodacom would need to significantly up its current R8.5bn per year network investment in order to bring the fixed line offering to commercial viability.
Joosub rejected the suggestion that the Neotel tie-up will reduce competition in the South African internet industry.
"The deal will not distort competition. Icasa is here to protect consumers - not to protect competitors from competition," he said.
Rivals are indeed nervous that a Vodacom tie-up with Neotel will frustrate their own fibre broadband plans, but the national broadband policy expects an acceleration in connectivity for South Africans.
Vodacom plans to spend R7bn on buying out Neotel. (Duncan Alfreds, Fin24)
In 2013, 33.3% of the South African population had internet access, according to the former Department of Communications.
However, the department (now renamed the Department of Telecommunications and Postal Services) submitted ambitious targets of 50% access at 5mbps by 2016, 90% by 2020, and 100% at 10mbps by 2030.
How this will be achieved is a significant challenge, according to government's South Africa 'Connect: Creating Opportunities, Ensuring Inclusion South Africa's Broadband Policy'.
Telkom's network
"Significant growth in the ICT sector over the last decade has not been accompanied by the realisation of the primary policy objective of affordable access for all to the full range of communications services that characterises modern economies," says the policy document.
"The slow deployment of fixed broadband services (ADSL), and its relatively high costs, meant that over the last five years mobile broadband rapidly became the primary form of broadband access; rather than providing a complementary service to fixed broadband as it has done in mature economies."
In addition, the policy urges that broadband networks in SA be open access so that it facilitates a large number of players and so increases competition and lowers pricing to consumers.
Vodacom's deal with Neotel takes direct aim at Telkom's ADSL monopoly. (Duncan Alfreds, Fin24)
In particular, the policy highlights Telkom's closed network as not being conducive to competition in the broadband space.
"In the fixed market Telkom is the sole provider of ADSL lines, though again there is some resale by ISPs. Whilst prices have come down, they remain high by global standards," according to the policy document.
"As a result South Africa only has 800 000 ADSL subscribers; a very low number for a lower middle-income country. Despite the fact that limited penetration of fixed-line copper networks constrains the availability of ADSL in all parts of the country, over 1.2 million ADSL lines lie fallow."
Meanwhile, Joosub said that the Neotel tie-up was a make-or-break for Vodacom.
"Vodacom is severely constrained by a lack of spectrum. We have the largest customer base of any mobile company in South Africa and our data traffic is growing faster than our competitors off a bigger base, yet we hold less mobile spectrum than Telkom or MTN.
"This has necessitated that we find new ways to use our spectrum more efficiently, something that we do better than any other company, but we have reached the limits of what is possible."
Watch this online video in which the GSMA explains why LTE deployment is slow.
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