In a statement issued in September, the Independent Communications Authority of South Africa (Icasa) said: “The ICT sector has been and continues to undergo rapid technology changes with far reaching implications for the local and international industries.”
The regulator is right and some hard decisions need to be made. In May 2014, Vodacom and Neotel announced a $557-million deal for the transfer of license control from Neotel to Vodacom; public hearings were held by Icasa at the beginning of this year, revealing that not everyone is pleased.
The deal will be great for Vodacom, giving it the spectrum it needs, fiber infrastructure and a decent wedge of the enterprise market, where Neotel has placed its focus.
“The regulator has to do the right thing and take back the spectrum and allocate it to everyone. If they allow the deal to go through, then they are sending the message that they don’t want competition,” Cell C’s Chief Executive Officer, Jose Dos Santos, said.
The fact that Cell C uses Neotel’s infrastructure for its backhaul and the data center for billing probably provides plenty of motivation for the company to prevent the merger.
“One needs to be very careful because spectrum in itself doesn’t create success. Spectrum with investment is what assists you,” says Shameel Joosub, Vodacom’s Chief Executive Officer.
Joosub says Vodacom has the least amount of spectrum despite being the largest network.
The Competition Commission is the field marshal in this battlefield. It was therefore fitting that I sat down with the commissioner, Tembinkosi Bonakele, and Hardin Ratshisusu, the acting deputy commissioner and head of mergers and acquisitions, at the commission’s offices in Pretoria.
In making a decision on mergers, the Competition Commission investigates and analyses the impact the merger will have on competition and public interest issues.
“We are not here to clip wings. Mergers that will bring about innovation and efficiencies, but without reducing competition, are quite welcome,” says Ratshisusu.
In large mergers, such as the one proposed by Vodacom and Neotel, the commission makes a recommendation to the tribunal. The commission says it works on the current market structure and is unable to take into account the mere possibility of other mergers that may occur. It says it essentially tries to predict the future, post-merger, and what the consolidation of market share will do to price and product availability.
There has been a lot said about how long this process is taking. Joosub told CNBC Africa how extremely frustrating it is. He sees Neotel as an opportunity for his company to grow and the mix of mobile and fixed-line as very important for the company’s future.
“The question really is how long can Neotel cope without the requisite level of investment that is needed,” he adds.
The merger approval timeline varies based on the complexity of the issues and stakeholder engagement. There are plenty of stakeholders in the telecoms space. At the time of the interview, Ratshisusu said they were 80% of the way to a decision.
“If they [Competition Commission] do give the go ahead for the deal it’s going to have a list of conditions attached to it, particularly along the spectrum and wholesale,” says Richard Hurst, Senior Analyst at Ovum.
The commission says the market is evolving and it’s hard to say where it is going since it does not know future policies or technological advancements. It also says that it is not for them to deal with the issue of spectrum.
The reality is that it’s cheaper to buy spectrum than increase the number of base stations.
Will the Vodacom/Neotel deal benefit the man in the street? Hurst says there won’t be immediate tangible benefits to customers, but that they can expect greater quality of service. Vodacom customers were shocked to learn that the company was increasing contract prices.
“It’s been a tough two years for the industry in totality and obviously the whole mobile termination rate debacle didn’t help the situation,” says Joosub.
One of the issues the telecoms business is facing is the increase in data consumption – which requires investment in extra capacity. There are also exchange rate and inflationary pressures to deal with. Input costs are high, times are hard and everyone is working to come out on top. Vodacom is not the only one worrying about the future.
MTN has been under pressure at home for a while now, despite doing well in Nigeria. Last September, MTN sold its stake in the Nigeria towers business for $1.8 billion. The operator, along with Vodacom, also bought out their Nashua Mobile subscribers for $176.6 million.
In a cautionary announcement, Telkom said: “Shareholders are further advised that Telkom and MTN South Africa remain in discussions regarding the potential extension of their existing roaming agreement to include bilateral roaming and outsourcing of the operation of Telkom’s radio access network, which if successfully concluded may have a material effect on the price of Telkom’s securities.”
“A deal won’t happen unless something changes significantly,” says MTN Chief Executive Officer, Sifiso Dabengwa.
MTN already has a network sharing agreement with Telkom so it could be waiting to see how the Vodacom/Neotel deal shapes up. There are those that feel that the government’s decision about its Telkom stake is causing the holdup.
“The government will be very reluctant to let go of their shareholding in Telkom. They have plans for Telkom in terms of the national broadband plan,” says Hurst. He says it’s more likely for government to get rid of its 13.9% stake in Vodacom, although it won’t open up enough money to help failing power utility, Eskom.
“Telkom has embarked on a strategy to improve performance and one of the key considerations in respect of this strategy is to grow beyond its core business of connectivity by expanding into ICT services,” said Business Connexion (BCX) and Telkom in a joint announcement.
BCX and Telkom withdrew the application to transfer control of BCX licenses to Telkom for $211 million. The two companies say they did not need Icasa approval for the deal based on their review of the Electronic Communication Act. The Competition Commission recommended that the deal for a change in control of shareholding of BCX to Telkom be approved with conditions.
“Telkom, being the largest provider of wholesale leased lines to downstream customers, has the ability to foreclose its downstream rivals from access to these wholesale leased lines which are essential inputs for the provision of downstream services including managed network services (MNS), value-added network services (VANS), hosting and information technology services (ITS). The commission also found that the merger will result in the merged entity having the ability and incentives to engage in bundling strategies that may result in anticompetitive effects,” says the Competition Commission.
The Competition Tribunal determined Telkom&#8217;s $187.5 million offer for BCX, nine years ago, would adversely affect downstream competition.
“The mergers on the face of it look like they are going to reshape the entire sector, but we don’t know what that world will be like,” says Bonakele.
Hurst believes the ICT sector will focus on efficiency for a while to bring down costs, meaning the industry-wide restructuring we have seen will continue.
Vodacom’s strategy has been to invest heavily in its network, including the Nashua Mobile acquisition. Joosub says the company has spent close to $781.3 million in South Africa this year, with a further $1.3 billion earmarked for next year.
The South African power crisis has, according to Joosub, resulted in the company spending $6.2 million on diesel generators. He would like the industry to work together in powering through some of the issues and share input costs. He also calls for a better relationship between government and the industry.
Vodafone, the majority stakeholder in Vodacom, finds itself fighting a merger in Britain, with merits similar to those Cell C is bringing to the forefront in South Africa. It is not uncommon for global telecoms companies to find themselves on both sides of the fence, depending on what suits them.
Vodafone wants Britain’s Competition and Markets Authority to set tough conditions on the $17.2-billion BT/EE merger. EE is Britain’s biggest mobile operator, the company is owned jointly by Deutsche Telekom and Orange.
It’s still unclear what South Africa’s ICT picture will look like in a year’s time.
With a harsh operating environment impacting company performance, tight regulation and an ever growing demand for data, the Competition Commission, will have its work cut out for it. Whatever happens, there are likely to be casualties.

Telecoms Battlefield

It takes weeks to secure an appointment with Nigeria’s high-profile Director-General of the Securities &amp; Exchange Commission (SEC). And when we do, it’s on a public holiday.
Walking into Arunma Oteh’s office in the country’s capital Abuja is like walking into a trophy store: shiny medals, mementoes, plaques and trophies take up an entire wall.
One glance is enough to convey the success of Nigeria’s tough-talking chief capital market regulator. A career she couldn’t have imagined.
As a child, Oteh wanted to be an inventor. A proud workaholic, she puts her discipline down to her sound upbringing.
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“My parents were really stern but also loving, and for my two sisters and I, the constant quest for knowledge and excellence was firmly rooted in this background. They had such a great sense of character and the courage to be different and standing up for what was right regardless of the cost. I believe they instilled this in me. My childhood is really what has made me who I am today,” says Oteh.
It was tough being the daughter of a father who had exalted expectations. Once, she ran home elated, report card in hand. She had big news.
“Dad, I did it, I came first in class!”
One look at her report, and her father said: “Great, but next time, you have to be first plus plus.”
Such was Oteh’s family. They looked down on mediocrity and believed in brilliance. Hailing from the southeastern part of Nigeria, Oteh grew up in Kano, northern Nigeria.
Oteh’s mother, a nurse, wanted her to become a medical doctor, her father, an engineer, wanted her to take on his profession. But Oteh had other interests. She recalls fondly her obsession to become an inventor. Computer science was in its infancy in the 1980s; she loved the sciences and believed she could become a pioneer. So she studied computer science.
In 1984, Oteh graduated top of her class and faculty from the University of Nigeria in Nsukka, after which she taught computer science to first year university students as part of National Youth Service Corps (NYSC), a compulsory government program for Nigerian graduates.
After NYSC, she went to Lagos and was interviewed for jobs. The offers came thick and fast, and she decided to work for Centre Point, a stockbroking firm, because she admired Dennis Odife, the owner of the company and a highly respected businessman.
“I was impressed with what he had done with the company and what he had become. It was an amazing decision and defined what I ended up doing later in life. I was hired at the time to start the management information systems department but few months into that role, he thought it would be good for me to work in corporate finance. That’s how I got into finance and got really excited about it too,” says Oteh.
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Oteh’s fascination for her new found career grew and she explored the next step for growth. Her mentor, Odife, had been to the prestigious Columbia Business School in the United States. And she saw this as a must.
She started reading up about business schools and applying in her first year at Centre Point. The acceptance letters poured in. And she made it through the selection process at Harvard Business School.
“My father had always said, if you do well, you can always get what you want,” says Oteh.
Oteh worked in the United Kingdom for some time and flew to Harvard in September 1988. Here, she found herself surrounded by intelligent people and erudition.
“Business school was amazing. The case study methodology employed at Harvard also helped hone my skills in decision-making and problem-solving. This is an environment that prepares you to take on the world. I was very interested in finance. As the first Nigerian woman in the Harvard Business School MBA program, my class mates were quite wowed and thought I was a princess.”
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It all led to a career as Director-General of the SEC, a post she has held since January 2010.
This is merely one of the many hats she wears. She was also elected Chairperson of the Africa Middle East Regional Committee (AMERC) of the International Organization of Securities Commissions (IOSCO) in June 2010. She is a member of the Nigerian Economic Management team and serves on the board of a number of organizations including the National Pension Commission (PENCOM) and Asset Management Corporation of Nigeria (AMCON).
Today, Oteh is charged with transforming the Nigerian capital markets and unlocking the country’s economic potential.
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Her appointment four years ago came at a crucial time, on the heels of the global financial crisis. Nigeria’s stock market had fallen 70% from its peak in March 2008. Investor confidence was low. There was need for change and a tough regulator.
By the time she started, Oteh already had a wealth of experience and believed she had the panacea.
Her message to the people was to save and invest wisely. To the policy makers, she preached against depending on short-term bank finance, and in favor of medium and long-term finance to fund infrastructure.
“Having that crisis helped, because people had seen what could go wrong. The environment to support a tough reform agenda was present as they could see the importance of a regulator that would do its job. When I joined, the vision was for the SEC to be the best regulator in Africa and I said, ‘best regulator in Africa?’ That’s not ambitious enough. Our aim should be to be the best regulator in the world. Nobody invests in a particular market because they love it. They are more interested in the safety and security of their funds. In that case, it is important to build a market that can stand globally acclaimed. This isn’t possible without integrity,” says Oteh.
Oteh was ready to put her money where her mouth was in an arduous revamp of the Nigerian capital markets.
It wasn’t going to be easy.
“That led us to alleging that 260 individuals and entities had carried out different forms of market abuse. The second thing was to focus on the Exchange. Nigeria had one operational exchange and being a visible symbol of our market, it was very important to ensure that we address the challenges of the Exchange because then, we develop the industry of fund and asset managers and develop the fixed income bond market to the point where it became easier for people
to borrow.”
Thanks to her efforts, today, she has the likes of the International Finance Corporation (IFC), which launched a successful bond last year. She has also been able to regulate over-the-counter markets.
“We have two platforms, the National Association of Securities Dealers (NASD), which targets unlisted securities so there is more efficient trading in those securities or the platform sponsored by the financial market dealers association which does wholesale trading in Federal Government bonds. Also, introducing new instruments like Islamic finance products, and encouraging real estate investment trusts,” she says.
With all these feats and more under her belt, Oteh believes there is still more to do, and with careful execution, it’s only a matter of time before all her boxes are ticked.
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There have also been some dark days along the way for Oteh, as in 2012, the board of the SEC had directed her to go on compulsory leave, following a probe into the near collapse of the capital markets and allegations of misappropriation of funds and disharmony in the apex capital market regulator.
Oteh fought the system tooth and nail and went to great lengths to expose inadequacies in the structure, accusing the Chairman of the House of Representatives of the Nigerian capital market of corruption and unaccountability in a heated exchange at the public inquiry.
Following a two-month suspension, Oteh was cleared of all allegations and went back to her job as Director-General.
“I was angry that a system that is so well-endowed was being managed irresponsibly. I had also built a longstanding career and reputation over 22 years anchored on excellence. I knew there would be risks attached to fighting back and that I would be misunderstood but I also felt that standing up for what was right, far outweighed any costs attached for me. If I didn’t do it, who would?” she told FORBES WOMAN AFRICA.
Prior to her appointment at the SEC, Oteh was Vice President of the African Development Bank (AfDB), and was at the forefront of internal reforms that scaled up the bank’s response to Africa’s development challenges.
She had also served as the bank’s Group Treasurer for five years, managing a portfolio of assets and liabilities worth billions of dollars. In her years at AfDB, she restored its ‘AAA’ rating by Standard &amp; Poor’s.
“Some of my most fascinating experiences were that people were just so excited to hear about Africa – there was such a curiosity about the continent. At the time, AfDB was a ‘AAA’-rated institution and we would go to sell AfDB bonds in Japan. People were relatively familiar with why we were so highly rated. So, most people felt very comfortable with the credit when you sold bonds – they knew there was no risk,” she says.
Oteh had also started the Euro currency programmes while at AfDB.
This great adventure with AfDB began post-Harvard, following a year’s project with the Harvard Institute for International Development assessing the competitiveness of manufacturing in West Africa. She had interviewed at AfDB where she got hired into the West and North Africa portfolios in 1992. She covered Nigeria, Egypt, Ghana and Sudan, traveling in these countries.
After being away from her home country for 22 years, Oteh, a proud patriot, believes there is no place like Nigeria. She is highly optimistic.
“There are no countries that have taken the bold steps we have in the financial sector in the last few years,” she says.
As her current term draws to an end in January 2015 – and that’s also when she will be turning 50 – Oteh and her team, are working tirelessly still, raising the bar and repositioning the face of the Nigerian capital market globally. It is yet to achieve demutualization and this is a direction the institution would like to steer towards.
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Oteh is also passionate about mentoring young girls, and advocacy. She holds a strong view on women’s place in society, drawing attention to the low number of women in key positions and boards.
“Equal opportunities should exist in the work place. A meritocracy where the best suited and qualified individual gets the job is also as vital.”
She also believes in a great support system and that young women should have self-belief.
“Successful leaders should pave the way for younger women to climb the corporate ladder through mentorship and coaching,” she says.
On career and family, Oteh, who acknowledges devoting her life to career, says she wouldn’t do it differently.
They call her the ‘Iron Lady’ for her tough decision-making.
“If leading change, being passionate, resilient and decisive about a great course is what makes me an iron lady, then I proudly raise my hand up high to that tag,” says Oteh.
She has come a long way from Kano. Oteh is not telling us what her plans are post her current assignment, but we are sure to hear more about her in the news.

Tag: Regulator

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Telecoms Battlefield

From College Princess To Queen Of The Markets