Vodafone boss upbeat on hybrid state ICT model

Vodafone Group CEO Vittorio Colao is optimistic that a breakthrough is near on the government's ICT policy white paper, saying a "hybrid" model proposed by local mobile operators, including Vodafone subsidiary Vodacom, is making progress.

"Yes, I think I am," Colao said when asked in an interview in Johannesburg this week whether he was hopeful that a resolution to the dispute would be found soon. The UK-headquartered Vodafone owns 65% of the JSE-listed Vodacom.

The white paper, published late last year, has been met with a chorus of industry opposition, led by the country's two biggest mobile operators, Vodacom and MTN. A plan to reserve all future "high-demand" spectrum for a single national wholesale network operator has come in for particularly harsh criticism from the big operators. The companies have warned that the policy, unless changed, threatened their continued high levels of infrastructure investment.

Spectrum is the lifeblood of the operators, which need it to continue expanding their 4G - and, eventually, 5G - broadband services to consumers.

The government wants to use the wholesale network to allow smaller players, including black-owned businesses, into an industry that is dominated by a few large incumbents. It has received cautious support for its plans from an association representing many of the country's internet service providers.

The big network operators, through Deloitte, recently submitted a proposal to Telecommunications and Postal Services Minister Siyabonga Cwele that the industry adopt the hybrid model. The model would allow firms to still get access to future exclusive-use spectrum assignments while also supporting the wholesale network by buying at least 30% of available capacity.

Colao warned that if the government pressed ahead with its original plan, denying future exclusive-use spectrum to Vodacom and other incumbents, it risked destroying the telecoms industry.

"I don't think all spectrum can or should or would go into a single entity. That is a model that doesn't exist anywhere in the world. The reason is that it would destroy the telecoms industry; there would be very little incentive for anybody [to invest]," said Colao.

"It's something you have to be very careful about. But in the implementation of the model, if you can find a way to make it work, then that's good. My impression is the policymakers now have a very good understanding of what it takes to make that model work in a hybrid or collaborative way."

He said it was important that telecoms policies, no matter the country, were implemented in a judicial and pragmatic way. The government's objective of fostering black participation in the sector through policy interventions was "legitimate and good".

"Whether you call it 'radical economic transformation', or you call it creating [black] industrialists ... it's a noble objective," Colao said.

He had told both the government and the regulator, Icasa, in meetings this week that a hybrid model was "workable". However, there had to be "a lot of discipline on the financial model, on the operating model and on the management" of the wholesale network, he added.

"It's not easy to create an entity that works both for existing and new players. Yes, it is possible to do it, but in implementation you need cooperation from the [incumbent] telecoms [players]. [The government] must be very disciplined on what [the wholesale network] is and how it will work ...

"In some ways, we, the operators, can be the best customers of this wholesale company. But we need to be seen as the best customers, not as the antagonists or people being deprived of spectrum."

Meanwhile, on this week's decision by S&P Global Ratings to downgrade South Africa's foreign-currency debt to "junk" and the decision by President Jacob Zuma to fire his finance minister, Pravin Gordhan, and reshuffle his cabinet, prompting a sharp decline in the value of the rand, Colao insisted that the developments would not affect Vodafone's local investment plans.

"Of course, we are not happy about the downgrade - for customers, for the employees, it's not a good thing. But at the end of the day, we take a long-term view ... Honestly, the downgrade is not good, but it's not something that would cause us to change our position [on investment]," Colao said.

Vodacom remained committed to black economic empowerment, he said, and was looking to the Public Investment Corporation, which owns 15% of the group, to help it facilitate a new equity deal soon.

"From the Vodafone perspective, we'd like this deal to be really broad-based, not a simply transfer of ownership," Colao said.

duncan@techcentral.co.za