Most Read Contributor in South Africa, September 2016
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
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
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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