Vumatel, CIVH merger gets green light

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Niel Schoeman, executive chairman of Vumatel.
Niel Schoeman, executive chairman of Vumatel.

The Competition Tribunal has approved, subject to conditions, the proposed merger whereby Community Investment Ventures Holdings (CIVH) seeks to increase its shareholding in Vumatel.

In a statement this afternoon, the tribunal says this means CIVH, which acquired its initial shares in Vumatel in June last year, will have sole control of Vumatel. The conditions will apply for a period of 10 years from the date of the implementation of the merger, it notes.

Vumatel is a last mile fibre access provider. It provides underground fibre broadband infrastructure in residential areas and homes. Niel Schoeman is executive chairman of Vumatel.

The company also provides fibre-to-the-home services to Internet service providers (retailers) which, in turn, offer Internet deals to the public.

In short, Vumatel connects homes to broadband Internet. Vumatel has become a popular brand in Gauteng with its notable dark pink branding, the tribunal says.

Local investment firm CIVH acquired 34.9% of Vumatel for an undisclosed amount last year, and entered into an agreement with Vumatel shareholders to acquire the remaining 65.1%, subject to funding and regulatory approvals.

According to the tribunal, of relevance to this transaction is that CIVH controls Dark Fibre Africa (DFA), a fibre-optic company which provides backhaul services to Vumatel.

DFA builds and operates optic fibre infrastructure which is leased to wholesale customers such as Vumatel and its competitors in the last mile.

DFA also controls SA Digital Villages, a fibre-to-the-home provider and Internet service provider specialising in the installation, operation and maintenance of fibre-optic networks in residential areas and homes, on which it also provides customers with services.

CIVH is jointly controlled by Industrial Electronic Investment (IEI) and New GX. IEI is controlled by Venfin, which is, in turn, controlled by Remgro.

The Competition Commission, which assesses large mergers before referring them to the tribunal for a decision, evaluated the merger and raised vertical competition concerns in the proposed transaction because DFA is considered to be the largest backhaul provider, assessed on a regional basis.

The commission had also raised horizontal competition concerns as it found Remgro indirectly controls Octotel, a Cape Town-based competitor to Vumatel.

Octotel, which also relies on DFA to provide it with backhaul services in the Western Cape, had raised concerns in relation to the proposed merger and was permitted to make submissions to the tribunal as an "intervenor".

Octotel urged the tribunal to prohibit the merger, arguing the proposed conditions were insufficient to prevent CIVH, via DFA, favouring Vumatel at the expense of rivals.

The tribunal has approved the transaction subject to conditions which require that the merged entity retains an open access service provision model for certain of its services post-merger, as well as increased transparency mechanisms and an obligation not to discriminate against its customers who compete with Vumatel.

The conditions also include two public interest obligations, one of which is confidential due to business sensitivity, the commission says.

The other provides for the merging parties to provide free uncapped fibre services to public and private schools that its networks bypass.

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