Vodacom and Remgro’s telecom division are taking their fight to merge their fibre businesses to the Competition Tribunal after the Competition Commission recommended the deal be blocked.
If approved by the tribunal, which has the final say on antitrust-related matters, the merger will create one of SA’s largest fibre providers.
The deal involves Remgro’s CIVH fibre units Vumatel and Dark Fibre Africa (DFA), which were folded into a new holding company, Maziv. Vodacom aims to take a 30% stake in Maziv, worth an estimated R13bn, with the option of raising that to 40%.
The transaction, announced in November 2021, had already received approval from SA’s telecom regulator but the deal has now hit a brick wall after an almost 22-month investigation by the commission, which on Tuesday recommended the proposed large merger “be prohibited”.
“The commission is of the view that the proposed transaction is likely to substantially prevent or lessen competition in several markets and that the conditions offered do not fully address the resultant harm to competition. Further, the public interest commitments provided by the merger parties do not outweigh the competition concerns.”
The competition body argues that 5G fixed wireless access (FWA) and fibre compete in the same market and that consumers stand to benefit from increasing competitive rivalry between FWA and fibre. Vodacom is SA’s largest mobile provider and a big player in 5G, while Maziv is already the largest fibre to the-home player.
“The proposed merger will result in the loss of direct competition between Vodacom and Maziv in the areas where both Vodacom and Maziv have deployed fibre.
“The commission’s investigation has shown that fibre players tend to reduce prices in areas where more than one fibre network provider has deployed fibre. This price competition is lost with the merger,” said the authority.
Remains committed
But this is not the end of the road for the two telecom companies, which are banking on making their case at the tribunal.
CIVH said it “remains committed to the transaction”, indicating it has not given up.
Vodacom said it is “surprised and disappointed with the commission’s recommendation given that both Vodacom and CIVH have endeavoured to thoroughly address competition-related concerns through a list of remedies and public interest commitments put forward to the commission.
“Though we are disappointed ... the commission’s recommendation is not the end of the process. Instead, the next step is for the proposed transaction to be presented to the tribunal,” said the Vodafone subsidiary.
Had the commission, which typically investigates matters such as proposed mergers, recommended the deal, the tribunal would usually follow suit. Due to the prohibition however, the merging parties now have the right to appeal to the tribunal.
If that fails, there is still the Competition Appeal Court, which considers appeals or reviews against tribunal decisions.
CIVH believes that the transaction “will deliver substantial benefits to both the SA consumer and the economy”. It said Vodacom’s planned investment “in excess of R10bn” holds particular significance as “a considerable proportion will be focused on developing new fibre infrastructure [while] attracting capital investment is particularly challenging”.
Vodacom said the investment will enable Maziv to extend fibre infrastructure to an estimated 1-million new households in lower income areas, create up to 10,000 new jobs, commit at least R10bn in capital expenditure, and facilitate the creation of small to medium enterprises through a fund formed for this purpose with R300m of committed capital.
The two companies say all concerns raised by the commission during the investigation can be “adequately addressed by a range of conditions and commitments proposed by the parties”.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.