JSE-listed Telkom plans to move forward with its court application to have the spectrum auction reviewed and set aside.

The telecommunications group participated in the Independent Communications Authority of South Africa’s (Icasa’s) long-awaited spectrum auction, spending over R2-billion to secure 20 MHz of 800 MHz and 22 MHz of 3 500 MHz during the bidding process in March.

While Telkom has been able to secure the much-needed sub 1 GHz in the spectrum auction, which it had not owned before, the firm feels it is constrained in its ability to acquire the amount of spectrum that it needs to compete effectively.

“To secure its ability to compete effectively in the mobile market, Telkom persists with its court application to ensure that the licensing of spectrum promotes effective competition in the mobile market in line with the objective of the Electronic Communications Act,” the company said in a statement on Monday.

Telkom’s application is set down for hearing from April 11 to 14 and the outcome may impact the auction and its outcome.

Despite this, Telkom said that its acquisition of 22 MHz of 3 500 MHz – the addition of which will bolster the group’s existing 28 MHz of 3 500 MHz to achieve a total of 50 MHz contiguous spectrum in this band – will enable it to advance an enhanced fifth-generation position.

The 20 MHz of 800 MHz, once available, will enable more efficient network deployment, increased coverage and capacity on the mobility layer, resulting in improved user throughput and experience, particularly in rural areas.

Icasa will communicate an update on the full availability of the 800 MHz after July 1.

An auction fee of R1.1-billion, the full amount relating to 3 500 MHz and the proportional payment for 800 MHz that is immediately available, is due within 30 working days.

“Shareholders are advised that the payment is expected to be made in the current financial year, impacting the current year debt level, capex spend and free cash flow (FCF). Telkom’s year-to-date FCF is in negative territory, tracking below its expectations,” the company said in the statement.

Notwithstanding the financial impact, Telkom has adequate capacity on its balance sheet to fund the spectrum while maintaining sufficient headroom of its loan covenants.

“The long-term strategic benefits of the spectrum acquisition outweigh the short-term financial impact.”