The Competition Tribunal has today issued an order prohibiting the proposed transaction involving mobile operator Vodacom and fibre infrastructure company Maziv.
Following the order, Vodacom issued a statement saying it is looking to appeal the ruling.
The order comes after in August last year, the Competition Commission recommended the R14 billion merger be prohibited.
This, after the competition watchdog found the proposed deal would likely prevent or lessen competition in several markets and that the conditions offered by the merging parties did not fully address the resultant harm to competition.
The Commission then referred the matter to the Competition Tribunal, an independent adjudicative body and is one of three independent authorities established in terms of the Competition Act.
Since then, Vodacom and Maziv, which is controlled by Remgro subsidiary Community Investment Ventures Holdings (CIVH), have been anticipating a favourable decision from the Competition Tribunal.
In a statement today, the Tribunal says the proposed transaction would have combined the country’s largest mobile operator, Vodacom, with one of South Africa’s largest fibre infrastructure players, Maziv.
It notes that Maziv is a wholly-owned subsidiary of CIVH, which has two main operating subsidiaries, Dark Fibre Africa and Vumatel.
In terms of the proposed transaction, Vodacom intended to acquire a certain shareholding in Maziv and to sell certain assets to Maziv.
“The Tribunal’s decision to prohibit the proposed merger follows an extensive hearing that took place over 26 days between 20 May to 27 September 2024. The parties also made further written submissions after this, the last of which was received by the Tribunal on 16 October 2024,” says the Tribunal.
Interested parties
During the hearing, it adds, the Tribunal heard evidence from various factual witnesses including from each of the merging parties; Frogfoot Networks, Telkom, MTN and Rain. At the Tribunal’s request, Hero Telecoms also provided factual testimony.
In addition to the factual witnesses of the abovementioned firms, four economic experts presented evidence on behalf of the Competition Commission, the merging parties and MTN.
The Department of Trade, Industry and Competition (DTIC) and the Communication Workers’ Union also participated in the proceedings.
Smaller internet service providers were also concerned the proposed merger would elbow them out of the market.
“The Tribunal’s reasons for its decision will be issued in due course,” says the regulator.
Under the deal, Vodacom was looking to acquire a 30% stake in the newly-created Maziv, with an option to increase the stake by 10%.
It said the proposed transaction would significantly propel South Africa’s social development and would be highly beneficial for the country, the economy and lower income households on a number of fronts, including:
Maziv was committing to invest capex of at least R10 billion over a five-year period, including the commitment to pass at least one million new homes in lower income areas, such as Alexandra, with fibre infrastructure over a five-year period.
The companies also made a commitment to create up to 10 000 new jobs, while at the same time providing job security and enhanced benefits for current employees potentially impacted by the transaction.
They were also prioritising SMME development by establishing a new enterprise and supplier development fund of R300 million over three years, focused on increasing the level of localisation across the value chain.
Vodacom also committed to invest in excess of R14 billion into South Africa though this transaction would come at a time when attracting capital investment is particularly challenging.
Appeal consideration
Vodacom says it has been informed by the Competition Tribunal that it has prohibited the proposed investment of up to R14 billion by Vodacom into Maziv.
According to the telco, the proposed transaction was designed to assist Maziv in growing its fibre footprint into lower income areas and would have been highly beneficial for South Africa.
It adds that during the Competition Tribunal proceedings, which concluded last month, the DTIC described the transaction as having “substantial positive public interest effects” on the basis that the merger parties committed to:
- Investing at least R10 billion over a 5-year period, predominantly in low-income areas.
- Passing at least one million new homes in lower income areas over a five-year period.
- Creating up to 10 000 new jobs.
- Establishing a R300 million enterprise and supplier development fund to prioritise SMME development.
- Providing high speed internet to over 600 adjacent schools and police stations at no cost; and
- Vodacom investing up to R14 billion into South Africa through the transaction.
Commenting on the Competition Tribunal’s decision, Shameel Joosub, CEO of Vodacom Group said: “I am deeply surprised and disappointed by the Tribunal’s decision. South Africa desperately needs additional significant investment, especially in digital infrastructure in lower income areas.
“Our investment of up to R14 billion would have changed millions of lives and created thousands of jobs. This comes after the concerns of our competitors, involved in the Competition Hearings process, and the DTIC were comprehensively addressed through remedies and commitments by the parties.”
Vodacom says it awaits the Tribunal’s detailed reasons for prohibiting the transaction in due course, before considering all options to Vodacom, which may include an appeal in the Competition Appeal Court.
Maziv says it acknowledges the decision by the Competition Tribunal.
The company is disappointed by the outcome but respects the Tribunal’s process, it says in a statement.
"We will await the reasons for the prohibition in order to consider our options and remain committed to driving innovation and economic growth through the power of connectivity."
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