Vodacom CEO expresses frustration over regulation

Vodacom. (Duncan Alfreds, Fin24)
Vodacom. (Duncan Alfreds, Fin24)

Johannesburg - Regulatory approval of the Vodacom-Neotel merger is taking frustratingly long, say telecom executives.

Speaking at a media briefing in Johannesburg on Wednesday night, both the Vodafone CEO Vittorio Colao and Vodacom [JSE:VOD] chief executive Shameel Joosub expressed how the approval process for the Neotel deal is taking longer than expected.

Vodacom, which is South Africa’s largest mobile network with 30 million subscribers, last year made a bid to buy fixed line operator Neotel for R7bn. Vodafone owns 65% of Vodacom and a Vodacom-Neotel merger would mean that the company would rival the likes of Telkom in the fixed line space.

The proposed Vodacom-Neotel deal is undergoing scrutiny from regulators such as the Independent Communications Authority of South Africa (Icasa).

"Of course it would be nice if M&A (merger and acquisition) processes took less time and were shorter and easier," Colao told journalists.

"We are a little bit bordering the limit here, it's already nine months.

"We haven't seen the end of it yet...we are at the high end of the range,” he said.

Colao further said that it would be “ideal” if the process took 3-6 months, but he admitted that in other cases around the world these types of deals can take longer to gain approval.

Meanwhile, Joosub said the slow movement on the Vodacom-Neotel deal is frustrating.

"For us the frustration really is that every day is a day lost. A day lost in terms of what we could provide in services,” said Joosub.

South Africa lags behind other countries in terms of its fixed line access.

According to telecoms research firm BuddeComm, South Africa has a mobile penetration rate of 154% but the country’s fixed-line usage rate only sits at 7%.

"Developed countries have 75% and higher,” said Joosub of other nations' fixed line usage rates.

Joosub further said the slow movement on the Vodacom-Neotel deal is also hampering the country’s broadband plan, which seeks to connect 100% of South Africans to internet services by 2020.

"We have a long way to go to the 2020 focus,” said Joosub.

Regulatory processes necessary

Local technology analyst and Managing Director of World Wide Worx, Arthur Goldstuck, told Fin24 that regulatory processes are necessary with deals such as the proposed Vodacom-Neotel deal.

“The regulators are in a tough position because they are obliged to get input from all interested parties, and a deal of this significance is going to attract far more interested parties than usual,” Goldstuck told Fin24.

“That said, there does need to be a greater sense of urgency at all regulatory levels to move us into a new era of connectivity. One can certainly place blame for South Africa falling so far behind on policy makers and the regulators,” said Goldstuck.

Greater competition in the likes of the fibre broadband market is also needed in South Africa, said Goldstuck.

Telkom has started rolling out fibre to the home broadband. But amid a limited roll-out other smaller players such as Vumatel have also entered this space by connecting suburbs with open access fibre networks that can be used by various internet service providers.

“It's essential for large players like Vodacom and MTN to enter the fibre market as they have the resources to roll it out on a large scale,” said Goldstuck.

“Independents like Vumatel are doing a terrific suburb-by-suburb job, but that's not enough for the large-scale roll-out needed. Telkom tends to respond to competition rather than lead the market, so it needs the more aggressive and nimble large players to move the market along,” Goldstuck told Fin24.

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