* ICASA prohibited from making final decision on auction
* Regulator says will use all legal avenues
* Communications minister calls for out of court mediation (Adds communications minister comment, Vodacom, analysts, context)
By Nqobile Dludla
JOHANNESBURG, March 9 (Reuters) - South Africa's telecoms regulator ICASA said on Tuesday it will appeal a court order restraining it from proceeding with an auction of radio frequency spectrum licences, needed to lower data costs, expand 4G capacity and roll out new 5G technology.
On Monday, High Court Judge Selby Baqwa passed an order prohibiting the regulator from going ahead with the auction pending a hearing on contentions raised by operator Telkom TKGJ.J and broadcaster e.tv. ruling is a major blow to the industry, especially mobile operators MTN MTNJ.J and Vodacom VODJ.J , who have been forced to re-purpose their existing allocations of 2G and 3G spectrum to deploy new 4G technology in the absence of new licences.
MTN said it was reviewing the decision while Vodacom called the development "negative."
Similar legal disputes halted the sale in 2016.
Operators have been waiting for more than a decade for the Independent Communications Authority of South Africa (ICASA) to release new spectrum licences, which President Cyril Ramaphosa has said would be an important economic boost for the country by creating jobs and increasing internet penetration and competition.
ICASA chairman Keabetswe Modimoeng said on Tuesday the regulator was dismayed by the court's decision but remained resolute that the licensing process would be finalised in due course.
"It is our considered view that the best option is to exhaust all possible legal avenues at our disposal, including appeals so to ensure that this sensitive licensing process is not only defined by industry players but also by the public interest," Modimoeng said.
Partly state-owned Telkom and e.tv had approached the court, seeking to review and set aside the bid process saying the regulator was auctioning spectrum which was already in use by broadcasters.
Communications and Digital Technologies Minister Stella Ndabeni-Abrahams said the department remained committed to completing the migration of broadcasting services to digital from analogue, which is at the heart of the legal battle.
"Like all parties involved the government would like to see the auctioning of the spectrum taking place without delay," Ndabeni-Abrahams said, adding that parties should consider mediation through alternative dispute resolution outside the court process.
But Modimoeng said, like in 2016, such out of court settlements took it nowhere and therefore "we are not going back there".
Analysts said it was preferable for such issues to be addressed at the outset as companies like Telkom are disadvantaged with MTN and Vodacom controlling almost 80% of the market in terms of revenue.
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