Remgro-owned Community Investment Ventures Holdings (CIVH) is pinning its hopes on the Competition Tribunal giving the R10 billion deal between its fibre business unit Maziv and Vodacom the green light.
This is according to Pieter Uys, CIVH chairman at Remgro, in an interview with ITWeb yesterday after the Competition Commission on Tuesday recommended the merger be prohibited.
The competition watchdog found the proposed deal will likely prevent or lessen competition in several markets and that the conditions offered by the merging parties do not fully address the resultant harm to competition.
Maziv was created last year by CIVH after it folded its fibre network operators – Vumatel and Dark Fibre Africa – into one giant fibre infrastructure company.
Under the deal, Vodacom is looking to acquire a 30% stake in the newly-created Maziv, with an option to increase the stake by 10%.
According to Uys, who is former CEO of Vodacom, the deal is valued at R10 billion.
He said CIVH is looking to make its case heard by the Competition Tribunal after the commission’s recommendation to have the mega deal blocked.
On Tuesday, shortly after the Competition Commission’s statement on the deal, Vodacom also came out saying it was looking for the tribunal to rule in its favour.
According to the mobile operator, the proposed transaction sought to “accelerate South Africa’s fibre reach, network quality and resilience, fostering economic development and helping to bridge South Africa’s digital divide in some of the most vulnerable parts of our society”.
New infrastructure development
Uys noted that Vodacom’s planned investment holds particular significance, as a considerable proportion will be focused on developing new fibre infrastructure at a time when attracting capital investment is particularly challenging.
“In 2018, we kicked off a process to find a funder where we looked locally and internationally. We found a few interesting investors from overseas; and they, unfortunately, pulled away during COVID and they didn’t want to come to South Africa anymore.
“But this didn’t make us change our strategy. So, we started looking locally – we looked at many potential investors into our fibre business. We looked at Vodacom, MTN, Dimension Data and some financial institutions. Eventually, Vodacom came out as the one that was the keenest to invest.
“This was not to do a merger, as it is spelled out in the Competition Commission’s recommendation. It is technically a merger; but for us, Vodacom will come in as an investor unlocking our strategy because today, we have a R20 billion debt on the balance sheet, which is huge.”
CIVH believes the transaction will be beneficial to the market in that Vodacom’s fibre assets will, as a result of the transaction, become commercially available on an open access, transparent and non-discriminatory basis.
“In addition, the investment will enable Maziv to extend fibre infrastructure to an estimated one million new households in lower income areas, create up to 10 000 new jobs, commit at least R10 billion to capital expenditure, and facilitate the creation of small to medium enterprises through a fund formed specifically for this purpose, with R300 million of committed capital,” Uys said.
He explained that during the commission’s investigation, which lasted more than 18 months, both merger parties committed to extensive and robust engagement with the commission.
“We believe that all concerns raised by the commission during this process can be adequately addressed by a range of conditions and commitments proposed by the parties.
“While we have not had the opportunity to study the commission’s reasons in detail, we are confident that the massive positive impact of the proposed transaction on critical issues like the democratisation of the internet in lower income areas, as well as growth of the economy, will be favourably considered by the Competition Tribunal. CIVH remains committed to achieving approval of the proposed transaction,” Uys noted.
Huge task
“We have been with the Competition Commission and their processes for 18 months now. It is a large deal, a multibillion-rand deal, and they have to do their work thoroughly. In the 18 months, they have been sending us requests for more information (RFIs) every month. We went through 14 different RFIs which we answered.
“If I look at what they summarised as the reasons why they are not supporting the transaction – there is nothing there that we didn’t know about on the concerns that they had. This was just a difficult process because we were working through a written submission process.
“I believe now we can sit down and work on these concerns and we will definitely come up with something that can work for them to ensure that competition holds and also for us as well as the other third-parties that are concerned.”
“I am actually looking forward to going to the tribunal, where we will get a chance to debate these concerns. At the tribunal, it’s not just through documents. We will actually sit down and argue, because in most cases, with written responses you tend to lose some of the concerns. Sometimes you tend to guess what you have to come up with. I honestly believe there is nothing of concern that they have flagged that we cannot resolve.”
He said there are three product categories in Maziv. “The first one is fibre-to-the-telcos, where we provide fibre a telco towers. That has slowed down because the mobile operators ran out of spectrum since government took a long time to issue more spectrum. But that will kick in again because of the spectrum.
“We also have fibre-to-the-business. This slowed down during COVID, with interest rates also going up. Businesses have been cautious, so it’s not growing as it grew, say, five years ago. However, it’s still growing.
“The growth that we have seen is really in the fibre-to-the-home where during COVID, everybody wanted to work from home and that’s where my passion came from.”
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