[29 April 2016] Neotel’s application for leave to appeal against the findings of the High Court regarding ownership by HDIs has been set down for hearing on 13 May 2016.
___[21 March 2016] In a move with important implications for transformation in the telecommunications and broadcasting sectors, Neotel have applied for leave to appeal against that part of the judgement of the High Court – reported below – relating to the provisions of the Electronic Communications Act governing ownership by Historically Disadvantaged Individuals (HDIs).
Interestingly this application comes in the wake of the acquisition of Neotel by Vodacom being called off: the fact that Neotel is undertaking the expense of pursuing clarity on a particular aspect of the judgement notwithstanding the lack of immediate practical consequence, speaks to the importance of this matter.
In their Notice of Motion, Neotel, argue that the Court erred in finding that there was a requirement that an applicant for approval of transfer of control over individual service licences is required to have 30% equity ownership by HDIs: this requirement only applies to applicants for individual service licences (i.e. those applying for the first time).
It further argues that the interpretation adopted by the Court means that this percentage would have to be present whenever there is a licence amendment or renewal and that this was not the intention of the drafters of the relevant provisions.
Finally they assert that ICASA does have the power to afford an applicant a period of time within which to comply with the 30% ownership requirement.
___[6 March 2016] The parties to the purported transaction announced on 1 March 2016 that the deal has fallen through and no further filings would be made with the Competition Commission or ICASA.
This follows the judgement of the High Court (Gauteng Division, Pretoria) – link below – which set aside the decision made by ICASA to approve the applications made to it for the transfer of control over Neotel’s service and spectrum licences to Vodacom. Of note is that the Court found that a meeting held between ICASA and Vodacom had discussed issues of substance which were not minuted or disclosed to other interested parties, creating a suspicion of bias.
Vodacom did not escape the ire of the Court (@pp35-36):
Having regard to all these considerations, I am of the view that a reasonable, objective and informed person, having regard to these facts, would reasonably apprehend that ICASA would not have brought an impartial mind to bear on the application before it. I therefore conclude that it has been proven that ICASA as the administrator who took the decision is reasonably suspected of bias. I have to point [out] that Vodacom played an active role in this regard by initiating the process giving rise to this finding.
Finally, the Court found that ICASA had erred in allowing the parties to proceed with the application notwithstanding that Vodacom did not have the required 30% ownership by Historically Disadvantaged Individuals (HDIs). The Court held that this must be present at the time of application and ICASA had no discretion to postpone compliance with this requirement.
_____[26 February 2016] The High Court this morning handed down judgement in the review proceedings launched against ICASA for its decision to approve the application brought for transfer of control of Neotel’s licences to Vodacom.
As predicted, ICASA’s decision has been set aside.
___[9 December 2015] As predicted this deal is in trouble. While news reports are focusing on Vodacom abandoning its bid to obtain control of Neotel’s spectrum licences, the real reason for the restructuring of the deal is to exclude these licences and the service licences which Neotel has. Why? Because it has finally dawned on the parties that the transfer of these licences to Vodacom or the transfer of control over these licences to Vodacom was not going to happen…
___[12 October 2015] As alluded to below, MTN has also launched review proceedings against ICASA in respect of its decision to approve the transfer of control over Neotel’s service and spectrum licences to Vodacom.
Specifically, MTN seeks a review of ICASA’s decision to approve Vodacom’s acquisition of Neotel or alternatively a review of ICASA’s decision to allow Vodacom to accept transfer of control of Neotel’s radio frequency spectrum licences for the 850MHz, 1800MHz and 3.5GHz bands.
Given the similarity of MTN’s claims to those raised in earlier applications for review brought by Telkom and Cell C, it has been agreed that all three matters will be heard simultaneously on 11, 12 and 13 November 2015.[Note that while the complete document including annexures amounts to 566 pages, the above link is to the 93 pages of important stuff. If you want the complete document (or the Cell C one) please just send us mail.]
November is going to be a critical month for this deal….
___[5 October 2015] We have scanned and created a link to Cell C’s Notice of Motion and Founding Affidavit (121 pages without annexures), for your reading pleasure.
Meanwhile it seems that
___[1 October 2015] More shots have been fired as Cell C has launched an application in the High Court (Gauteng Division) for the reviewing and setting aside of ICASA’s decision to approve the transfer of control of the various Neotel service and spectrum licences to Vodacom. Cell C argues that the applications should be resubmitted to ICASA for reconsideration in terms of the Radio Frequency Spectrum Regulations 2015.
The Notice of Motion filed by Cell C specifies 10 November 2015 as the date on which its application is to be heard.
___[17 August 2015] ICASA have released a reasons document setting out the reasons for their decision in approving the applications before it for transfer of control over Neotel’s service and spectrum licences.
____[17 July 2015] As predicted ICASA’s decision to approve the application before it for the transfer of control over Neotel’s service and spectrum licences to Vodacom has been taken on review to the High Court. Telkom is the first (but probably not the last) to take issue with ICASA’s flawed process.
__[9 July 2015] We have obtained the non-confidential version of the Competition Commission’s report on this proposed transaction, which sets out the rationale for the Commission’s recommendation that they approve the transaction subject to specified conditions.
___[2 July 2015] ICASA has published a notice in the Government Gazette setting out the conditions which it wishes to attach to its approval of the application made by Neotel for the transfer of control over its IECNS, IECS and radio frequency spectrum licences to Vodacom, and invited the public to make written submissions on these proposed conditions.
The two proposed conditions relate to ownership by historically disadvantaged groups and to roll-our in under-serviced areas:
First, the Applicants are required to comply with the requirement for 30% (thirty percent) of the equity ownership of the individual licence that is the subject of the transfer of control application being held by persons from historically disadvantaged groups (“the BEE Requirement “), as contemplated in section 13(6) read with section 9(2)(b) of the EC Act. The Authority, however, recognises that it may not be practicable for Applicants to comply with the BEE Requirement from the onset. Therefore the Authority wishes to determine the reasonable period within which the Applicants should be permitted to ensure compliance with the BEE Requirement; and
Second, the Authority has established that the implementation of the proposed transaction will result in consolidation of spectrum. The Authority recognises that broadband access across the country remains a challenge that needs to be addressed with due speed. The Authority views the implementation of transactions such as the present to offer an opportunity, amongst other initiatives, for the Authority to utilise the regulatory instruments at its disposal to facilitate the attainment of universal service and access to broadband services by all South Africans, with priority being given to rural and under serviced areas (as defined in the Under Serviced Area Regulations, 2011). Accordingly, in accordance with the provisions of section 13(6) read with section 9(2)(c) of the EC Act, and in order to ensure the utilisation of spectrum (which is a scarce resource) to achieve the developmental goals of the Republic of South Africa in relation to broadband, the Authority is considering the imposition of the condition that at least 25% (twenty five percent) of any broadband roll out to be undertaken by Neotel following the implementation of the transaction (with the specification of a minimum of 5Mbps), be undertaken in under serviced areas (hereinafter “the USA Roll – Out Condition “).
ICASA notes that when evaluating the applications made to it, it considered the “potential impact that the consolidation of valuable and substantial spectrum under the control of Vodacom may have on the various markets”. It is not, however, in a position to “regulate the effects of such consolidation on competition in the various markets until it has undertaken an in -depth enquiry in terms of Chapter 10 of the EC Act read with section 4B of the Independent Communications Authority of South Africa Act No. 13 of 2000”.
Comfortingly, ICASA states it “will consider to undertake such an inquiry in due course”.
Written representations regarding:
should be sent to Ms Refiloe Motsoeneng, Project Manager: Market Consolidations
Fax : 011 566 3214
E-mail to: RMotsoenencaicasa.org.za and MarketConsolidationsAicasa.org.za
The closing date for submissions is Thursday 23 July 2015.
___[30 June 2015] The Competition Commission today issued a press release confirming that it has approved the large merger notified to it subject to “stringent conditions”.
The conditions referred to relate to
The decision on whether or not to approve the recommendations of the Competition Commission now sits with the Competition Tribunal.
__[22 June 2015] ICASA has (apparently) announced its intention to grant conditional permission for the transfer of control of the Neotel service and radio frequency spectrum licences to Vodacom as applied for by Neotel (see below). News reports published on 18 June 2015 indicate that the approval had been granted subject to two conditions, one relating to transformation and the other to roll-out obligations. The details of the conditions were to be made public on Wednesday 20 June 2015 but the planned media event did not occur. At this stage ICASA has not made any formal announcements although its Chairperson has defended the decision in the face of explicit statements from industry that they will seek to challenge it in the courts.
Our position remains that the decision as made by ICASA is vulnerable to review. The length of time taken by the regulator to reach a decision is also problematic and reflects a range of unacceptable delays being visited by ICASA onto the commercial decisions made by licensees.
The Competition Commission is expected to make known its decision on the proposed transaction in the next few weeks.
___[21 December 2014] Updated with Neotel and Vodacom’s consolidated response to the submissions set out below.
[17 December 2014] Updated with links to submissions made in response for ICASA’s invitation to comment on the proposed transfer of control over Neotel’s spectrum and services licences.
___[15 December 2014] ICASA has indicated that public hearings into the proposed transaction will be held on 15 and 16 January 2015
The public hearings will be held as follows:
Date: 15 and 16 January 2015
Venue: Block C Presentation Room (ICASA), 164 Katherine Street, Sandton
____[1 October 2014] We have obtained a copy of the actual application filed with ICASA.
__[18 September 2014] ICASA has called for public submissions on the application for tranfer of control in the individual electronic communications service and individual electronic communications network services licences held by Neotel.
Closing date for submissions is 7 October 2014.