Allegations made by the Competition Commission of perjury against a Vodacom executive last week are, in my mind, a matter of a company believing its own spin.
In a nutshell, the charge comes from the Competition Commission alleging that Vodacom was less than truthful in its reasoning why it wanted to buy service provider Global Telematics (Glocell).
Vodacom's official submission was that it wanted to strengthen ties with its customers. The Competition Tribunal, however, pointed out that Vodacom's own internal documentation showed it wanted to get rid of competition and improve its margins.
Well, the latter should come as no surprise. Companies almost always only buy another company in order to increase their revenue stream and profitability. I have never heard of a company buying another because it felt sorry for the latter's customers.
However, the fact that Vodacom wants to get closer to its customers and the fact that its purchase of Glocell was profit-driven does not make these mutually exclusive concepts.
Simple logic
As the market edges ever closer to saturation, the network operators have to move further down the food chain.
Paul Vecchiatto, Cape Town correspondent, ITWeb
Cellular network operators, particularly Vodacom and MTN, have been buying up their service providers for some time. The logic is simple.
When the cellular market was in its infancy, a three-tier system was put in place, namely the network operators who built and ran the networks, the service providers (who supplied billing services) and the agents (who sold the contracts and handsets). It made sense to have this model 14 years ago when the industry was in its infancy, but now, as the market edges ever closer to saturation, the network operators have to move further down the food chain.
Customers only see the logo of the cellular network operator on their contracts and SIM cards. So if they have a problem they identify themselves as being a client of either Vodacom, Cell C or MTN and not of any particular agent or service provider. This means the network operators themselves have to build their own customer relations structures and this duplicates what many of the service providers already have.
So we now have duplicate cost structures and the network operators are still paying commission to their aligned service providers and agents. It therefore makes business sense from the network operators' point of view to flatten this structure as far as possible.
Hot collar
It was this reasoning that led the Competition Tribunal to approve the deal. But what got the Competition Commission hot under the collar was the fact that Vodacom did not state any of this up front.
What Vodacom at first implied was that the deal was directly for the good of its customers, while all along it was fretting about its margins. Why, then, did it not state this up front?
Maybe it is because saying that Vodacom wanted to get closer to its customers sounds good and far better than squeaking about squeezed margins?
Vodacom and the other cellular operators have been pushing the line about really caring for their customers for a very long time. However, dealing with their complaints departments may leave one with another impression altogether.
The fact is that these businesses have so ingrained the "party line" in their culture that it is not surprising it should be their first reason when wanting to do anything including signing off documentation to a statutory body.
And naturally the Competition Commission has become tired of this - and the laying of the perjury charge has fired a shot across companies' bows and put a wobble into Vodacom's natural spin.
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