MTN, Vodacom given boost by promise of long-delayed spectrum

Telecommunications operators were given a boost on Thursday when President Cyril Ramaphosa indicated a long-awaited auction of new broadband spectrum could take place within the next month.

Vodacom [JSE:VOD] and MTN [JSE:MTN], the country's two biggest mobile-phone providers, have long been demanding the opportunity to bid for new spectrum to extend high-speed internet to new customers and increase data revenue.

The constrained nature of the market is forcing costs for subscribers higher, they say, a trend that’s been condemned by regulators and protested by customers using the social media hashtag #DataMustFall.

Communications Minister Stella Ndabeni-Abrahams will direct the Independent Communications Authority of South Africa to start the process of spectrum licensing, Ramaphosa said in his state-of-the-nation address in Cape Town.

"This is a vital part of bringing down the costs of data, which is essential both for economic development and for unleashing opportunities for young people," he said.

MTN shares traded 0.2% lower in early trade in Johannesburg on Friday, while Vodacom fell by the same amount.

"This process will include measures to promote competition, transformation, inclusive growth of the sector and universal access," he said, without giving details. In South Africa, transformation is a term used to mean the increased participation of black people in the economy.

Vodacom, majority owned by UK-based Vodafone Group Plc, and MTN had a combined 75 million customers in South Africa at the end of 2018, or about three-quarters of the current market, which includes those with more than one mobile-phone subscription. Cell C and Telkom, almost 40% owned by the government, make up the top four.

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

Any upcoming auction should be based on a requirement for providers to cut fees and lay on services including free WiFi in public spaces, the Competition Commission, another regulator, said in April.

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