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Ispa seeks to block Vodacom-CIVH’s R13bn deal

On November 10, Vodacom said it had agreed to acquire a co-controlling interest in InfraCo’s fibre assets in South Africa, along with Remgro and New GX Capital, in a new entity consisting of assets including Vumatel and DFA. Picture: Simphiwe Mbokazi.

On November 10, Vodacom said it had agreed to acquire a co-controlling interest in InfraCo’s fibre assets in South Africa, along with Remgro and New GX Capital, in a new entity consisting of assets including Vumatel and DFA. Picture: Simphiwe Mbokazi.

Published May 1, 2022

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SOUTH AFRICA’S Internet Service Providers’ Association has lodged an objection with the Competition Commission to the $862 million (R12.9 billion) Vodacom and Community Investment Ventures Holdings deal.

On Friday, it said: “Ispa has lodged an objection with the Competition Commission and provided requested information. The commission has previously expressed concern about high levels of concentration of ownership in the telecoms industry.

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“If we are to continue fostering robust competition in South African telecoms, it doesn’t seem particularly smart to Ispa to allow the largest company in the mobile space to merge with the largest company in the FTTH (fibre-to-the-home) and national long-distance fibre space.”

CIVH is 57% owned by Remgro and operates electronic communications infrastructure through its subsidiaries Vumatel, South Africa’s leading fibre network provider, and Dark Fibre Africa, which operates a national metro fibre network spanning 13 000km.

On November 10, Vodacom said it had agreed to acquire a co-controlling interest in InfraCo’s fibre assets in South Africa, along with Remgro and New GX Capital, in a new entity consisting of assets including Vumatel and DFA.

Upon completion of the transaction, Vodacom would hold a 30% equity stake in a newly created subsidiary of CIVH known as InfraCo, which would hold CIVH’s assets as well as fibre-to-the-home and select wholesale transmission assets which Vodacom will contribute to InfraCo.

The deal at the time was punted as marking the beginning of an ambitious plan to bridge the great digital divide.

However, Ispa said that while the deal, which pools these firms’ fibre network assets, is scrutinised by competition authorities, Ispa had sought “reassurance that the mobile operator’s historical closed-access culture” would be swept aside should the deal succeed.

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The organisation said its 205 internet service provider members had to date struggled to obtain wholesale offerings from Vodacom for on-selling to consumers.

“Conversely, Vumatel and DFA have been pivotal in fostering fierce competition amongst ISPs by historically providing wholesale, fibre-based deals,” it said.

Promised cash injections to advance the rollout of high-speed fibre in South Africa were to be welcomed, but Ispa said it was concerned about the ability of a traditional closed-access culture to be successfully married to a historically open-access, entrepreneurial-based culture.

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“Vumatel and DFA’s infrastructure investment programmes have provided more South Africans with access to high-speed fibre-based internet than any other comparable initiatives. As working remotely becomes the norm, it must be ensured that the open-access philosophy – a national policy of South Africa – is protected and expanded,” Ispa said.

In November, Vodacom said the deal would enhance and scale up Vodacom's fixed offerings across both the consumer and business segments, and leverage a shared cost model to accelerate the provision of open-access infrastructure in South Africa.

It said that ultimately the consumer would benefit from the fresh capital injection and shared cost approach, as it will significantly scale up the fibre reach of InfraCo's various fibre brands, including in smaller towns.

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CIVH group chief executive Raymond Ndlovu said at the time: “This milestone investment will boost our ambitious fibre rollout programme across the country and assist in narrowing the digital divide by enabling affordable access to connectivity in some of the most vulnerable parts of our society. Ultimately, it will result in much-needed inclusive economic growth.”

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