Competition Commission welcomes blocking of R14bn Vodacom merger

The Competition Commission has welcomed the news that the Competition Tribunal has prohibited Vodacom and Business Venture Investments, also known as “Maziv”, from merging.

The Commission had in August 2023 recommended the deal be blocked, as it would lessen competition, particularly in the market for 5G Fixed Wireless Access (FWA) and fibre.

Merger between Vodacom and Maziv

The Commission noted that Vodacom is South Africa’s biggest mobile operator, while Maziv is one of the largest fibre infrastructure players.

The deal included Vodacom acquiring 30% interest in Maziv. In addition, Vodacom planned to transfer fibre assets to Maziv.

The Commission said their findings revealed that the deal between the two would deprive low-income consumers of the benefits that fixed competition exerts on mobile products offer, including lower prices.

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Blocking the merger

“In addition, the Commission found that the merger creates the ability and incentive to partially foreclose or otherwise disadvantage rival MNOs, other internet service providers and fibre operators,” added the Commission.

In addition, the Commission did not find any significant benefits arising from the proposed merger that were not already independently planned prior to the merger or were not already in place.

The tribunal blocked the deal, without giving any detailed reasons or stating whether it agreed with the reasons given by the Commission.  

Hearing to discuss merger

The tribunal’s decision comes after a hearing from 20 May to 27 September 2024. The tribunal took into consideration written submissions by Vodacom and Maviz, together with testimonies from witnesses such as Frogfoot Networks, divisions of Telkom SA, MTN and Rain.

“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,” said the tribunal.

After issuing the order, it said it would issue the reason for the decision in due course.

The Competition Commission is an independent adjudicative body established to regulate competition between firms in the market.

The Competition Tribunal is an independent adjudicative body that adjudicates on matters referred to it by the Competition Commission.

The Commission is the investigating and prosecuting agency in the competition regime while the Tribunal is the court.

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Vodacom to consider Appeal Court

Following the tribunal’s decision, Vodacom said it will wait for detailed reasons before considering its next steps.

In its update on the merger to shareholders, the mobile operator said this deal would have assisted Maziv in growing its fibre footprint into lower-income areas, and this would have been beneficial for South Africans.

Vodacom noted that the Department of Trade, Industry and Competition had labelled the deal as having “substantial positive public interest effects”.

The next step for Vodacom is to consider approaching the Competition Appeal Court.

The deal in the eyes of Vodacom

Vodacom said the deal would see an investment of at least R10 billion over a five-year period, predominantly in low-income areas; with the creation of up to 10 000 jobs.

Establishing a R300 million enterprise and supplier development fund to prioritise SMME development, and providing high-speed internet to more than 600 adjacent schools and police stations at no cost, were among its plans.

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Maziv expressed its disappointment in a statement and also said it will wait for the reasons for the order by the Tribunal before taking any steps.

“We remain committed to driving innovation and economic growth through the power of connectivity.”

Minister to advise

On the tribunal’s prohibition of the merger, Minister of Trade, Industry and Competition Parks Tau said he would assess and advise on the next steps in line with the Competition Act once the reasons are known.

In his view, the parties involved in the merger were able to commit to substantial public interest conditions that will significantly boost investments and the growth of fibre and mobile connectivity in the country.

“This is in line with South Africa’s priorities for industrialisation, reindustrialisation, and investment to foster economic growth and create jobs.”

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