Keabetswe Modimoeng, the former chairman of the Independent Communication Authority of South Africa (ICASA) who stepped down just this week, said MTN Group’s proposed acquisition of rival Telkom should be considered seriously by regulators and that consolidation in the sector is “inevitable”.
Modimoeng, who resigned as chairman of ICASA after overseeing the successful auction and licensing of broadband spectrum earlier this year, said markets with populations four times the size of South Africa have “two-and-a-half or three players”. South Africa has five operators: Telkom, MTN, Vodacom, Cell C and Rain.
“Market consolidation is not necessarily a bad thing, it just has to be properly managed to ensure it does not stifle competition,” Modimoeng said in an interview with TechCentral on Friday. “Let’s interrogate this and see what it means to the ordinary person in the street and to the commercial viability of these companies.”
Modimoeng, who intends to take time off after a gruelling period as chair of Icasa’s powerful decision-making council, said he has not accepted – or even received – any job offers from telecommunications industry players, and he doesn’t yet know what he intends to do next with his career.
“I would caution regulators, both Icasa and the Competition Commission, that we need to be alive to the fact that this is very fluid space, that it’s highly contested and capital intensive,” he said, adding that some market players are struggling to compete and some are even on their “economic deathbed”.
Asked whether he felt South Africa’s rules barring the sale and trading of spectrum could prevent MTN from buying Telkom, Modimoeng said the policy environment “needs to be agile”.
“The ground shifts daily. If the current regulatory provisions don’t fully or partially accommodate such a transaction, it’s only fair and responsible for all relevant institutions, including the regulator, to ensure they explore all possible ways of adjudicating this kind of a transaction,” he said.
He said that the legislation governing the ICT sector needs a “thorough and urgent overhaul”. Regulations need to be modernised, too, Modimoeng said.
Whatever happens between MTN and Telkom, regulators need to be careful not to inadvertently stop the big capital investments that are being made by market players – together, MTN, Vodacom and Telkom invest more than R30-billion in their networks in South Africa every year. “You need deep pockets just to survive in this space, never mind thrive.”
If MTN and Telkom decide to proceed with a transaction, the very least that regulators need to do, Modimoeng said, is to interrogate the deal and ask what it means for consumers and the health of the industry.