Subscribe
  • Home
  • /
  • Broadband
  • /
  • Commission recommends MTN's Afrihost bid goes ahead

Commission recommends MTN's Afrihost bid goes ahead

Staff Writer
By Staff Writer, ITWeb
Johannesburg, 29 Oct 2014
MTN's purchase of a majority stake in Afrihost will not lessen competition, says the Competition Commission.
MTN's purchase of a majority stake in Afrihost will not lessen competition, says the Competition Commission.

The Competition Commission today recommended to the Competition Tribunal that it approve MTN's acquisition of a 51% stake in Afrihost, despite receiving objections from competitors.

MTN said in June it was buying the stake, for an undisclosed amount, to add scale to MTN South Africa's online ICT service offering, which is focused on the consumer and small and medium enterprise (SME) market.

The commission notes MTN is an integrated telecommunication service provider active across various levels of the value chain, and provides mobile telephony solutions to its customers in the wholesale and retail markets, while Afrihost is an Internet service provider operating primarily at the retail level.

"The transaction presents horizontal overlaps in the activities of MTN and Afrihost in relation to the provision of hosting, ADSL and mobile data services at a retail level. Afrihost also resells MTN's ADSL and mobile data services, thus the merger also presents a vertical overlap," it says.

However, its assessment of the deal found MTN and Afrihost do not appear to be direct competitors because Afrihost focuses on the SME and residential segment while MTN mainly focuses on the large corporates.

The commission notes there are several alternative entities that can provide hosting services, such as Internet Solutions, which is bidding to buy MWeb Business through parent company Dimension Data; Business Connexion Group, which is in the process of being bought out by Telkom; Gijima and Vox.

In addition, in the ADSL and mobile Internet market, Afrihost is a relatively small player and competes with MWeb Connect, Vox, Telkom Mobile and Vodacom, among others, it adds.

The commission received objections to the transaction from competitors, which related to the "potential exclusionary conduct that may arise from the vertical relationship between MTN as a wholesaler of ADSL and mobile data and Afrihost as its reseller".

However, it believes, in both the ADSL and mobile data markets, it is unlikely the merger will give rise to foreclosure effects that are harmful to SME and residential customers as these customers can easily switch providers. "In relation to the large corporates, since Afrihost does not provide services to these customers, MTN is already in a position to engage in such conduct before the merger."

As a result, the commission believes the proposed deal is unlikely to lead to a "substantial prevention and lessening of competition in the hosting, ADSL and mobile data markets".

Other matters currently before the commission include:

* MTN's purchase of Telkom Mobile's radio access network infrastructure;
* Vodacom's bid for Neotel;
* Telkom's offer for Business Connexion, and;
* The joint venture between Dimension Data and MWeb to create a WiFi company.

Share