Subscribe

Vodacom-Neotel re-negotiate merger

Paula Gilbert
By Paula Gilbert
Johannesburg, 23 Nov 2015
The Competition Tribunal has begun a closed pre-hearing for the Vodacom-Neotel merger after the merging parties asked for a postponement of a scheduled hearing.
The Competition Tribunal has begun a closed pre-hearing for the Vodacom-Neotel merger after the merging parties asked for a postponement of a scheduled hearing.

Vodacom is in discussions with Neotel and its shareholders to "explore a revised transaction structure" for its pending R7 billion Neotel buyout.

Vodacom advised the market this morning the "outcome of these discussions will directly impact the extent of the approval being sought from the Competition Tribunal and the scope of the Competition Tribunal hearing".

The tribunal hearing that was to begin today was set to be the final hurdle in the deal that has been over 18 months in the making.

The tribunal says it agreed over the weekend to delay the start of the scheduled hearing after a request from the merging parties.

"Instead, a pre-hearing will be held on Monday, 23 November, to give the merging parties and intervening parties, such as Telkom, MTN and Cell C, an opportunity to discuss the application and, if necessary, the issue of wasted costs. Also to be determined is when the hearing can reconvene," the tribunal says in a statement.

The multibillion-rand deal has been on the cards since May 2014 but has met with intense opposition from rival telco operators, which see the deal causing an un-competitive ripple effect, especially in terms of spectrum allocation.

The Competition Commission recommended in June that the Competition Tribunal approve Vodacom's acquisition of Neotel, but with conditions. The Independent Communications Authority of South Africa (ICASA) has also given its blessing for the merger to go ahead.

The Competition Tribunal hearing was set to run from today until 4 February 2016, but this morning's proceedings will determine whether Vodacom and Neotel's revised discussions over the merger provide grounds for a postponement.

Those opposing the deal, including rival telecoms operators, will likely oppose the postponement as well, and could have grounds to claim compensation for legal costs incurred if the hearing is postponed.

The tribunal says other interveners in the matter include ICASA, which is opposing the Competition Commission's conditions for the merger, as well as telecommunications and postal services minister Siyabonga Cwele, and economic development minister Ebrahim Patel.

The recommended conditions include that Vodacom not directly or indirectly use Neotel's spectrum for a period of two years, and that Vodacom invests R10 billion in fixed network, data and connectivity infrastructure. Vodacom will also be required to ensure that, within a period of two years, the value capital held by black economic empowerment shareholders increase by R1.4 billion and that Vodacom not retrench any employees as part of the merger.

The Competition Tribunal is tasked with determining whether the deal will in fact give Vodacom an unfair competitive advantage over its rivals as they argue it will. Vodacom is South Africa's biggest mobile network, with 33.7 million customers in South Africa and 65.1 million across all of its operations.

Neotel could not shed any light on its discussions with Vodacom, or what the "revised transaction structure" would look like.

"We are unable to disclose further information due to the confidentiality agreement that the parties are bound by," a Neotel spokesperson told ITWeb.

Vodacom's rivals Cell C, Telkom and MTN have also all launched separate court applications to try review or set aside ICASA's decision to approve the deal. The parties argued their cases in the North Gauteng High Court earlier this month and a decision in the case is expected today.