ICASA’s Proposed Draft Regulations Tighten Processes For Shareholding Changes of ICT Licensees

• South Africa

• Licensing

13-06-2022

In an attempt to “provide further clarity regarding ICASA’s standard terms with respect to individual licences and to enhance compliance, and to streamline the submission of documents to ICASA”, the Independent Communications Authority of South Africa (“ICASA”) published Draft Regulations Regarding Standard Terms and Conditions for Individual Licences under Chapter 3 of the Electronic Communications Act, 2005 on the 16th of March 2022.

However, it is our view that, if implemented, these Draft Regulations will not only have an adverse impact on licensees but will also have a knock-on effect on transactions that may or will result in a change in shareholding or control of the licensee, such as mergers and acquisitions transactions, restructurings, and listings.

The most significant change brought about by the Draft Regulations would be the removal of the requirement for a licensee to simply notify ICASA of any changes in its shareholding, to be replaced with a requirement to obtain ICASA’s approval before any change is implemented. As drafted, ICASA’s approval would be required irrespective of the size or value of any proposed transaction.

This ICASA approval would be in addition to any notification or approval required under the Competition Act, thereby adding more red tape to what could already be a lengthy process.

According to ICASA, these proposed changes are necessary as the notification process, in its present form, is susceptible to abuse, has often been incorrectly applied, and was not adequate to enable ICASA to properly monitor and manage shareholding changes impacting on the ownership or control of licensees. ICASA stated that such unmanaged changes may conflict with the objectives of, and ICASA’s mandate, as the regulator under, the Electronic Communications Act, 2005.

ICASA has indicated that the process will be prescribed in the Process and Procedure Regulations. To date, it has not yet published amendments to these regulations. As with various other recent pieces of legislation or regulations, it is, therefore, not clear what will be required to obtain ICASA’s approval, and we will have to wait to see what process is eventually prescribed by ICASA. If the current process for the approval of change of control applications is anything to go by, any transactions that will have the effect of changing the shareholding of a licensee may be drawn out even longer (currently anywhere from 6 to 18 months) and have significantly higher costs.

While we applaud ICASA for taking steps to ensure that the objectives of the Electronic Communications Act, 2005, and ICASA’s mandate, are properly implemented and managed, unless the process is clearly defined and properly managed, and ICASA increases its capacity and capabilities, these stricter regulations will significantly hamper the growth and flexibility of the industry and the market.