AltX-listed Huge Group is bitterly disappointed with the Competition Tribunal's decision to bar it from intervening in the MTN-iTalk Cellular merger hearing, currently before the country's highest competition authority.
Huge Group chairman Anton Potgieter says the decision is bad for the local telecommunications sector, as it will diminish competition, effectively wiping out one of only three cellular service providers in the country.
The company argued in its submission to the tribunal that the merger would restrict service providers' ability to drive competition in the upstream market for mobile voice telephony products and services.
Huge Group initially attempted to acquire a majority stake in iTalk earlier this year, from the Bebinchand Seevnarayan Trust, but its bid failed when MTN decided to exercise its pre-emptive rights over the 59% of iTalk that it does not already own.
The Competition Commission recommended, in November, that the MTN-iTalk merger should go ahead unconditionally and referred the matter to the Competition Tribunal.
Huge Group's application to intervene and participate in the merger hearing was yesterday dismissed by the tribunal, with costs.
Viable case
“We are very disappointed. We felt that we had very viable arguments to add to the deliberations, but the tribunal obviously didn't see it that way,” says Potgieter.
He claims the country's competition law became the biggest obstacle in the company's case. “The competition law looks at market share and, on the face of it, iTalk only has a 2% market share. However, the disappearance of one of only three independent cellular providers is not good for competition, especially in the telecommunications market, which is regulated.
“Distribution channels like iTalk are the only way that consumers could get access to lower cellular prices.”
The proposed merger also threatens the existing discounting agreement that is in place through a service provider agreement between MTN and iTalk, Potgieter states.
From another angle, he explains that, if Huge Group was allowed to intervene and the merger had been blocked, it would have given Huge Group another crack at acquiring iTalk.
“This is not the main issue in our objection. However, iTalk had been one of our suppliers and now there will only be two in the market (Nashua and Altech Autopage), which means we lose.”
End of the road
Potgieter says the Huge Group would not pursue the matter further by taking it to the Competition Appeal Court. “You need to know when to walk away.”
He adds that taking the matter to the appeal court would only have created a hostile situation. “The only thing that we could have achieved was to get the decision, barring us from intervening, overturned. But the tribunal will rule in favour of the merger anyway.”
Regardless, Potgieter believes Huge Group did the right thing, from a corporate perspective, in terms of trying to preserve competition.
“But I fear that any good we may have done is too little, too late for competition. iTalk could have done a hell of a lot to lower cellular pricing.”
The MTN-iTalk merger hearing, before the Competition Tribunal, will begin on 6 January.
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