On 30 March 2015, the Independent Communications Authority of South Africa ("ICASA") published the Radio Frequency Spectrum Regulations, 2015 ("Regulations"). The Regulations came into effect on 1 April 2015, and repeal the Radio Frequency Spectrum Regulations, 2011 ("2011 Regulations").

The Regulations contain a number of notable changes to the 2011 Regulations, and include amongst others, the introduction of a procedural and regulatory framework for the transfer of control of radio frequency spectrum licences. Prior to the publication of the Regulations, there was no regulatory framework for considering applications for change of control of a radio frequency spectrum licence. Although the Electronic Communications Act, 2005 ("Act") had been amended to provide for ICASA's written approval for a change of control, there were no regulations that prescribed how ICASA should deal with these applications, including the criteria for approving or rejecting applications for a change of control.

The Regulations are therefore in line with changes made to the Act, which have extended ICASA's powers to consider and approve transactions in the electronic communications sector.  In terms of the Regulations, ICASA may not approve the assignment, cession, or transfer of control of a radio frequency spectrum licence where the transfer would result in the reduction of equity ownership held by historically disadvantaged persons to be less than 30%, or the reduction of the BBBEE status to a below level 4, or below the level which the transferor is already at. The inclusion of BBBEE requirements as a disqualifying factor is similarly consistent with the Act's objective of promoting direct ownership by historically disadvantaged persons and ensuring the economic participation of historically disadvantaged persons within the electronic communications sector.

It's worth noting that the Regulations do not contain any transitional provisions relating to  applications currently pending before ICASA. That is, whether pending applications for transfer of control must now be considered in terms of the Regulations. Surprisingly, ICASA has not dealt with this issue in the Regulations, and in the absence of any express provision, ICASA must consider any applications currently before it, against the backdrop of the regulatory vacuum that existed prior to the publication of the Regulations. It will be interesting to see how ICASA therefore considers issues such as BBBEE and competition that have been raised by stakeholders in both the Vodacom and Neotel transaction, and to some extent the BCX and Telkom transaction.

Nevertheless, the Regulations have, undoubtedly brought a significant change to merger activity within the electronic communications sector. As telecommunications companies continue to foster consolidation, telecommunications companies and other companies operating within the electronic communications sector have to be mindful of the regulatory constraints and their impact on future M&A activities.

Although ICASA is yet to publish any regulations for change of control in respect of individual service licences, ICASA has by all accounts, taken a significant step in strengthening its regulatory muscle, and it appears that it just a matter of time before a comprehensive regulatory framework for transfer of control is finally put into place.

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