Cell C’s Boss Wants The Competition Commission Reconsider Vodacom/Neotel Merger

Mobile services provider Cell C has challenged the Vodacom/Neotel merger saying it poses a serious threat to its business and to other industry players.

“What the Commission has said to Vodacom is that the company can proceed with building the network and investing in infrastructure that can be switched on in two years,” Jose Dos Santos, Cell C’s chief executive told CNBC Africa. 
Dos Santos said the Commission’s recommendation that some elements of the deal be addressed by policymakers was not pragmatic.

“The policy makers have not made decisions for about eight years now, what are the chances of any changes over the next two years,” he questioned. 

“The move is anti-competitive. The terms are tough and harsh on us (other competitors). We suggest that the spectrum goes back to ICASA so everyone can bid for it.”

The Cell C executive added that South Africa needs to invest in efficient networks and telecoms infrastructure to remain competitive with other global players. 

“We are not against the transaction of Neotel/Vodacom as an asset purchase; we are saying give the spectrum back to ICASA so it can be issued to all telecoms players so we can build better infrastructure.”

The reaction by Cell C comes 24 hours after the Competition Commission approved the Vodacom/Neotel merger with conditions and recommended the move to the Competition Tribunal.

South Africa’s mobile telecommunications company, Vodacom intends to acquire Neotel. The proposed transaction is likely to substantially lessen or prevent competition in the mobile services market.

“The acquisition will confer first mover advantages to Vodacom relating to network speed, capacity and mobile offerings. Vodacom will not be constrained by other competitors as they are unlikely to match its offering,” said the Commission in a statement.

“These factors taken together will likely lead to reduced choice and higher prices to end customers in the absence of effective constraints on Vodacom. The merger is also likely to have a significant impact on the structure of the South African mobile markets and future competitive dynamics.”

The Commission said there was a negative effect of the merger on the structure of the mobile market in South Africa.

The Competition Commission’s Hardin Ratshisusu told CNBC Africa that the Commission had looked at both public interests concerns and competition concerns.

“With respect to the public interests we have addressed concerns with respect to the spectrum advantage that could accrue to Vodacom. So there are restriction on when they can use the spectrum,” said Ratshisusu. 

“Vodacom shall not directly or indirectly use Neotel’s Spectrum for the purpose of offering wholesale or retail mobile services to any of its customers for a period of two years from the approval date or 31 December 2017, whichever is earlier,” said the Commission’s statement.

“The two year deferment period is intended to give an opportunity to policy makers to address the spectrum challenges in the industry.”

“We’ve taken due care in our analysis and recommendation to protect competition now and in the future, but the success of these conditions is predicated on the relevant government departments and ICASA promulgating necessary policies and allocating spectrum for the benefit of the whole country”, added Commissioner Tembinkosi Bonakele.