Insight into the Telkom litigation on Spectrum Licenses

South Africa

Telecommunications operators waited over 17 years for the telecoms regulator, the Independent Communications Authority of South Africa (ICASA) to release spectrum licences needed to lower data costs for South Africans and add network capacity for the increase in demand for data. As fate would have it, the licensing of the International Mobile Telecommunications (IMT) spectrum (also known as high-demand spectrum) in South Africa has over the years faced various legal impediments, delaying the roll-out of 5G and the expansion of 4G capacity. This resulted in South Africa, unlike its African counterparts, being one of the few countries that have not allocated 4G/LTE spectrum on the continent and delayed further rollouts of 5G networks. The delay has forced local telecommunications operators to improvise on existing spectrum, with many of them resorting to spectrum sharing, re-farming and carrier aggregation.

ICASA’s efforts in the recently completed auction pertaining to the IMT spectrum the 700MHz, 800MHz, 2 300MHz, 2 600MHz and 3 500MHz bands which are required for high-speed broadband and 5G were not without the legal challenges it faced previously in its attempt to auction the high-demand spectrum.

The spectrum auction was initially set for 31 March 2021. However, a legal impasse ensued shortly after ICASA’s announcements of the spectrum auction with Telkom, MTN and Etv legally challenging ICASA on varying aspects of the auction process.

MTN challenged ICASA on licensing the 3.5GHz spectrum, which according to MTN, would result in tier-one operators being side-lined in the auction while Etv challenged ICASA for including the 700MHz and 800MHz bands which were still being used by television broadcasters on the basis that, inter alia, the telecommunicators who successfully bid on licenses to bands that use these frequencies would not have full use of the bands. Etv further challenged the plan of the Minister of Communications and Digital Technologies (Minister) and argued that the move to switch-off analogue at the end of March 2022 would kill the businesses of free-to-air broadcasters. On the other hand, Telkom had various reasons for disputing the auction, including that the way in which the auction is structured will entrench the dominance of MTN and Vodacom.

Despite the challenges it faced preciously with the proposed spectrum auction, on 10 December 2021 ICASA finally proceeded to issue an invitation to apply (ITA) in respect of the licensing process for the IMT spectrum. On January 2022, Telkom again launched a court application against ICASA to halt this process, which application was made in two parts. Part A had sought to have the court urgently suspend the ITA while the court deliberates on Part B of its application, which focuses on the merits of Telkom’s arguments against the ITA. Fortunately, the ITA was better received by the majority of the telecommunications mobile operators who were in support of the completion of the auction and the rollout of the much-needed spectrum. Consequently, Telkom’s court action was met with opposition from MTN and Vodacom, as well as the Minister, who filed court papers to stop Telkom’s application to halt the auction process with the fear that Telkom’s legal challenge would ultimately delay the auction.

MTN argued that the interdict would further delay the spectrum auction process at a time when it is needed. Cell C and Vodacom also argued that further delays were unfavourable for the telecommunications industry and the public in general. It is no doubt that, as argued by ICASA, MTN, Cell C and Vodacom, if successful, the Telkom litigation would continue to hamstring the growth of the telecommunications sector. Further, South African consumers would continue to be subject to exorbitant data costs as the full realisation of economic spinoffs and cost-benefits for consumers which would otherwise be derived from the spectrum would yet again be delayed.

Following deliberations between the parties involved, Telkom in January 2022 asked for Part A of its application to be removed from the court roll. ICASA also announced on 8 April 2022 that it reached settlement with Telkom in respect of Part B of Telkom’s court application, which was set to be heard between 11-14 April 2022.

Part B of Telkom’s application dealt with the review of the way ICASA formulated the auction process, claiming that it would result in an uneven playing field. Telkom had asked the court to impose a structural or supervisory interdict on ICASA to ensure that ICASA does not adopt an opportunistic interpretation of the court’s order to avoid complying with its statutory and constitutional obligations. Telkom’s application was made on various grounds including that:

  • ICASA failed to conduct a new competition assessment that allows for affected parties to comment, which would promote effective competition in the telecommunications industry, but instead, ICASA relied on “outdated” assessments in designing its ITA;
  • ICASA failed to consider the spectrum agreement between Vodacom and Rain which could have an impact on the new spectrum licensing and other telecommunication operators. Telkom said the commercial arrangements are not simple roaming deals and have served to give more Vodacom and MTN, the two biggest market players, an unfair advantage; and
  • ICASA has separated the licensing of the wholesale open-access network (WOAN) spectrum from the high-demand spectrum which Telkom believes that the two spectrums are interlinked and cannot be dealt with separately. ICASA decided to temporarily suspend the WOAN spectrum auction to allow the high-demand spectrum permanent licensing consultation process to be completed and to enable ICASA to “interrogate the impact of the outcomes on the licensing of the WOAN spectrum.”

In terms of the settlement reached between ICASA and Telkom, Telkom agreed not to pursue the litigation any further and ICASA agreed that it will issue an information memorandum by no later than 30 June 2022 for the licensing of the unsold/unassigned spectrum from the auction (being the spectrum lot of 2x10MHz in the IMT800 band) and any other IMT spectrum that is presently available for licensing except for the spectrum currently set-aside for the WOAN, which licensing process is intended to be completed by March 2023.

Additionally, ICASA undertook to consider the impact of the outcome of the auction on competition in the mobile market and to conduct an enquiry into the existence of a secondary market for spectrum, including making an assessment of whether there is a need for regulatory intervention.

The settlement with Telkom and the successful completion of the auction process pertaining to spectrum licenses are not the only wins ICASA’s has had in 2022. Its litigation with Etv pertaining to the move to switch-off analogue was also resolved. The court on 28 March 2022 dismissed Etv’s application to restrain the Minister from determining the analogue switch-off date until every person has or is provided with set-top boxes (STBs), whether registered for STBs or not. The court dismissed the application with costs and deferred the analogue switch-off date from 31 March 2022 to 30 June 2022.