Tribunal told fibre companies’ merger will cause ‘irreversible harm’ to SA telecoms sector

The Vodacom shop at N1 City in Goodwood. Picture: Ian Landsberg/Independent Newspapers

The Vodacom shop at N1 City in Goodwood. Picture: Ian Landsberg/Independent Newspapers

Published May 21, 2024


Nicola Mawson

The Competition Commission has slammed a proposed merger between Vodacom, Vumatel, and Dark Fibre Africa as being “anticompetitive and having the potential to create a pivotal shift in the telecoms sector, taking the industry backwards”.

The proposed merger will effectively result in a new company Maziv being created through the combination of Vumatel and Dark Fibre Africa – making Maziv the largest fibre infrastructure player in South Africa.

Maziv will be partially owned by Vodacom, while the South Africa’s largest mobile operator will simultaneously hold on to its mobile business, long-haul fibre assets, and retail ISP business.

Advocate Daniel Berger, SC, delivering his opening statement on behalf of the Competition Commission yesterday at a Competition Tribunal hearing, argued strongly that the proposed deal be prohibited because “the merger, if allowed, will fundamentally restructure the industry”.

Moreover, Berger said Vodacom would have “effective operational control” over the combined entity.

“It’s crucial to note that the structural changes and subsequent harm, if allowed, will be irreversible,” said Berger.

“The commission also contends that there are no substantial public interest benefits or efficiencies arising from post-transaction that outweigh the competition harm that has been identified. The commission contends that it would be against public interest to permit the proposed merger.”

In fact, said Berger, the poor will lose out because such a merger will concentrate fibre – the most cost-effective way of connecting to the internet – in the hands of a giant company.

Berger also argued that the parties’ proposal that a body be created to oversee the merged company was not feasible.

“The merging parties are asking to take us backwards,” he contended.

“As telecom regulators seek to introduce competition as a permanent remedy to the regulation of market power and vertical integration, regulation is seen as secondary.”

In any event, Berger said, the industry already had a regulator in the form of the Independent Communications Authority of SA (Icasa).

MTN’s representative advocate Robin Pearse, SC, said when there was a merger of this sort, the competitive issues needed to be closely scrutinised.

In this instance Pearse said Vodacom would have a material influence over Maziv.

The merging parties, represented by advocate Jerome Wilson, SC, refuted that there would be a lessoning of competition, stating that rather there would be increased competition and the merged company would extend internet access to as many people as possible.

Wilson said the commission’s approach to prohibit the merger was “retrograde”, as it would “take a backwards step in the ability of South Africans, in particular lower LSM groups to achieve all of the benefits and knock-on economic consequences of having access to the internet”.

Wilson said Vodacom would invest about R6 billion into Maziv in a bid to enable the deal, and the new entity would also open access to Vodacom’s fibre infrastructure, which is currently not the case.

On behalf of 5G provider, Rain, advocate Piet Olivier said the company was generally supportive of the merger if it was subject to certain conditions, as Rain and other operators would have access to a faster and better maintained network.

However, Berger said the merger had the potential to “remove all competitive interaction between fixed and mobile operators, and open the industry up to conflicts of interest on a grand scale”.

Speaking for the Communication Workers Union, advocate Mduduzi Sikhosana said the labour organisation wanted an employee share-ownership scheme of 10% of the merged company, as well as an indefinite moratorium on retrenchments related to any new company coming out of the merger, instead of the parties’ proposed five years.

The hearing continues today.