The Competition Tribunal has concluded that the proposed R14 billion merger between Vodacom and Maziv “cannot be justified on substantial public interest grounds”.
Yesterday, the competition watchdog provided the public version of the reasons why it prohibited the R14 billion deal in October last year.
The deal would have brought together Vodacom, South Africa’s largest mobile network operator (MNO), and Maziv, a key player in fibre infrastructure.
Maziv is wholly-owned by Community Investment Ventures Holdings (CIVH), whose major fibre businesses include Dark Fibre Africa (DFA) and Vumatel.
As part of the transaction, Vodacom intended to acquire a 30% stake in the newly-formed Maziv, with an option to increase its shareholding by a further 10%.
In its decision, the tribunal stated: “The proposed transaction’s anti-competitive effects will be permanent.
“The merger-specific public interest benefits of the proposed transaction, on the other hand, are limited in duration and do not outweigh its negative competition effects that relate to various relevant markets and that will ultimately impact millions of South African consumers that will increasingly in the future be making use of data/internet services.”
It added: “For all the above reasons, the tribunal has prohibited the proposed transaction.”
Threat to competition
The tribunal’s decision aligned with a recommendation from the Competition Commission in August 2023, which advised against the merger.
The commission concluded that the deal would likely harm competition in several markets and that the remedies proposed by the merging parties were insufficient to prevent this harm.
The commission’s case is that the proposed transaction raises horizontal and vertical competition concerns and ultimately negatively affects South African consumers.
“The merger parties disagree but nevertheless tender mostly behavioural conditions mainly for the vertical concerns (not for the horizontal concerns) and tender fibre roll-out and other public interest commitments that we assess under the public interest,” said the tribunal.
Concerns were also raised by smaller internet service providers (ISPs), which feared the merger would push them out of the market.
Vodacom and Remgro, CIVH’s parent company, are expected to present their case to the Competition Appeals Court in July in an effort to overturn the decision.
According to the tribunal, Vodacom is active across the telecommunications value chain, offering mobile voice, messaging and data services to residential and business clients.
It noted the critical role mobile connectivity plays in South Africa, with over 90 million active SIM cards and 41.6 million mobile data users as of 2023, representing a 69% population penetration rate.
Vodacom leads the mobile network operator market, followed by MTN. Other operators include Cell C, Telkom, Rain and Liquid Telecom. Only Vodacom and MTN have subscriber bases exceeding 20 million.
The commission’s investigation revealed that Vodacom builds and operates its own national and metropolitan fibre networks, including last-mile fibre connections, and uses these to offer retail services directly to consumers and enterprises.
The company’s fibre assets include fibre-to-the-home (FTTH) and fibre-to-the-business (FTTB) networks. It also holds significant mobile and microwave spectrum licences, which are central to its operations and relevant to the merger’s regulatory assessment.
Vodacom currently holds 14% of assigned mobile spectrum, with allocations across the 900MHz, 1 800MHz and 2 100MHz bands. It also provides national roaming services to Cell C and Telkom.
DFA, one of Maziv’s core assets, operates fibre networks in major cities, including Johannesburg, Cape Town and Durban, as well as in smaller metros like Polokwane, Emalahleni and East London.
It holds spectrum licences in the 26GHz band, designated for point-to-multipoint microwave services and not usable for mobile operations. Initially a passive infrastructure provider, DFA has expanded into managed fibre services across the value chain.
Market fears
Vumatel, another key subsidiary, focuses on open-access last-mile fibre infrastructure for FTTH and FTTB.
After installing fibre in residential areas, the company offers network capacity to ISPs, enabling them to deliver retail services.
The tribunal explained: “In other words, it provides an active network over the fibre infrastructure, allowing ISPs to connect to the network on an open access basis.”
According to the watchdog, a wide range of stakeholders submitted concerns regarding the merger.
These included fears around market concentration, exclusion of competitors, vertical integration risks, tying and bundling practices, potential abuse of a first-mover advantage in 5G, and the effectiveness of proposed open access conditions.
The tribunal pointed out that many third-parties argued that no set of conditions could sufficiently address the competition risks. While some suggested potential remedies, most favoured outright prohibition, it added.
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