Vodacom fibre deal not in public interest says competition watchdog

The Competition Tribunal says the public’s benefits from the Vodacom and Maziv deal are temporary and do not outweigh the negative impact on competition.

Additionally, the merger would affect various markets and, in the long run, millions of South African consumers who rely increasingly on data and internet services.

This follows the tribunal’s 29 October 2024 order, blocking the R14 billion transaction. The tribunal was expected to provide its reasons within 20 business days but stated that the case’s complexity made it impossible to meet the deadline.

“The proposed transaction’s anti-competitive effects will be permanent,” says the tribunal.

The tribunal says various third parties raised concerns about the proposed transaction during the Competition Commission’s investigation. Most third parties who submitted feedback believed the merger should be blocked, as no remedies would be sufficient to resolve these concerns.

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These concerns included market consolidation, horizontal and vertical competition issues, customer foreclosure, bundling, first-mover advantages, 5G-related matters, competitor elimination, information-sharing risks, and open access conditions.

As part of the deal, Vodacom planned to acquire a 30%-40% stake in Maziv, which owns the fibre assets of Vumatel and Dark Fibre Africa.

The company would pay at least R6 billion in cash and contribute its own fibre assets, valued at R4 billion at the time, along with an additional cash payment based on Maziv’s valuation at closing.

Experts have said that a Vodacom-Maziv marriage would make the entity dominant in the market.

Minister of Trade, Industry and Competition Parks Tau intended to appeal the tribunal’s order to block the deal. 

“The Ministry participated in the merger proceedings on public interest grounds in line with merger provisions of the Competition Act, which led the merger parties to commit substantial public interest conditions to significantly boost investments and growth of fibre and mobile connectivity in South Africa.

“This is in line with South Africa’s priorities for industrialisation, reindustrialisation, and investment to foster economic growth and create jobs,” Tau said in a statement at the time. 

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Vodacom and Maziv argued that significant investment is needed in South Africa, especially for digital infrastructure in lower-income areas.

Moneyweb previously reported that Vodacom had planned to invest in fibre rollout in low-income areas, spending R10 billion and creating 10 000 jobs as part of its deal.

The tribunal’s reasons say: “It [the deal], however, does not commit to any specific number of direct employment opportunities during this, in our view, relatively long period, considering that the markets in question are expected to grow rapidly”.

Vodacom and Remgro, which owns Maziv will go to court in July for a final attempt to secure approval for their proposed merger. The Competition Appeal Court has scheduled the appeal hearing for July 22 to 24.

This article was republished from Moneyweb. Read the original here.