In a change of tactic, Allied Technologies (Altech) yesterday announced it would no longer contest MTN's R1.4 billion decision to buy 100% of the local arm of Verizon Business.
In a statement last night, Altech said it had withdrawn its case and that “MTN has given a number of general undertakings in respect of the way in which it proposes to conduct the Verizon business”.
The statement goes on to say: “These undertakings have given Altech satisfactory comfort to address its competition law concerns.”
The move leaves MTN's path free of obstacles to complete a deal that is expected to gain competition approval by the local telecommunications market. MTN has confirmed that a written agreement has been signed between the two companies.
It's in the details
The telecoms company says it has agreed not to give preferential treatment to its Network Solutions (MTN NS) division, or to Verizon, should the Competition Tribunal approve the deal. Essentially, it has agreed that all products it sells will carry the same pricing for all players in the industry.
In MTN's written statement to Altech, it says: “MTN undertakes to Allied Technologies and its subsidiaries that it will treat MTN NS and Verizon SA on an equivalent basis to any other firm of a similar nature, and will not provide the above entities with preferential pricing or preferential incentives, whether directly or indirectly, in respect of products or services offered by MTN.”
MTN has been and remains confident its purchase of Verizon will not create an anti-competitive environment.
The company also believes the authorities will approve the deal. “MTN continues to be confident the proposed merger will not reduce nor prevent competition in the markets in which MTN and Verizon SA operate,” says MTN SA MD Tim Lowry.
More to lose
When Altech set out to block the merger last year, the industry expressed surprise since the company has little to do with the Internet service provider (ISP) space. However, it gained permission from the Competition Tribunal to present its arguments at the hearings, which start today. At the time, the company was concerned the deal would strip the ISP industry of competition.
Altech was not the only company to oppose the deal. Internet Solutions (IS) has also expressed its concerns around competition if the deal between the telecoms giant and SA's third-largest ISP goes through.
IS was the most likely candidate to contest the deal, because it has more to lose from the deal than Altech. Altech does not have a data business that will be affected by the deal, whereas IS will now have to compete with a slightly bigger Verizon.
However, Altech has other business relationships with MTN that could well be affected if it scuppered the deal. The company's Autopage cellular is licensed to carry MTN subscribers and also owns another billing company which does work with several of the mobile operators.
It is unclear how IS feels about Altech's decision to back off, and the company was unavailable for comment this morning.
Diversify or die
Irnest Kaplan, head of Kaplan Equity Analysts, says the acquisition is relatively small fry for the pan-African mobile operator.
He says the acquisition needs to be approached from two angles to see the impact of the deal. “In the data space, for example, there will be little impact. MTN NS was never a big player in the market, and combined with Verizon will only increase its share slightly.”
The other players in the mobile market include Telkom, Internet Solutions and Vox's DataPro. “Vodacom Business has also recently entered this space.”
The bigger impact is where the mobile operators will be able to offer bundled solutions that include mobile voice, mobile and fixed data solutions. “This will give them a competitive-edge,” he adds.
According to Kaplan, the mobile businesses, like Vodacom and MTN, have to look at fresh options, particularly with high mobile penetration reaching saturation levels and mobile termination rates about to drop. “The industry is starting to get harder for them and they will need to look at diversifying. They will want to become a full telecommunications provider as opposed to a mobile operator.”
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