Blow for Vodacom

South Africa’s antitrust regulator urged the Competition Tribunal to block Vodacom’s deal to buy Remgro’s fibre businesses, the watchdog said on Tuesday.

South Africa’s Competition Commission, which investigates deals for any antitrust issues, rejected Vodacom’s acquisition of a minority stake in Remgro’s unit.

The final decision on the transaction valued at R13.2 billion has been referred to the country’s Competition Tribunal.

“The Commission is of the view that the proposed transaction is likely to substantially prevent or lessen competition in several markets and that the conditions offered do not fully address the resultant harm to competition,” the regulator said in a statement.

“Further, the public interest commitments provided by the merger parties do not outweigh the competition concerns.”

This is the second big announcement coming from South Africa’s watchdog in as many days after the body questioned the dominance of big tech firms operating in the country, including Alphabet-owned Google.

African mobile companies have been investing in infrastructure as they seek to monetize services offered on their networks, towers and data centres.

Wireless carriers expect the continent’s fast-growing, young and increasingly tech-savvy population will turn to their smartphones to access a wide range of services from entertainment to banking and insurance.

Still, South African operators are battling with operating challenges, including an ongoing power crisis, unemployment and vandalism of its infrastructure.

While the country has a large number of fibre operators, consolidation of the sector would assist in dealing with certain market dynamics.

Vodacom, the largest wireless carrier in South Africa, said though it is disappointed by the decision, “it is important to note that the Competition Commission’s recommendation is not the end of the process.”

The next step will be for the transaction to be presented to the Competition Tribunal, it said

The operator walked away from a large fibre acquisition with Neotel several years ago after it faced a number of regulatory battles and legal opposition to the deal by competitors.

The Johannesburg-based firm recently also expanded its operations into Egypt and Ethiopia.

CIVH and Maziv respond

CIVH and Maziv noted the recommendation by the Competition Commission to prohibit the proposed acquisition of a strategic stake in Maziv by Vodacom.

“While we are disappointed, it is important to note that the Commission’s recommendation is not the end of the process,” they said.

The parties will now approach the Competition Tribunal to present evidence and argue for approval of the merger. CIVH remains committed to the transaction.

“We firmly believe that the transaction will deliver substantial benefits to both the South African consumer and the economy,” they said.

Vodacom’s planned investment in excess of R10 billion holds particular significance as a considerable proportion will focus on developing new fibre infrastructure when attracting capital investment is particularly challenging.

The transaction will be beneficial to the market in that Vodacom fibre assets will, as a result of the transaction, become commercially available on an open-access, transparent and non-discriminatory basis.

In addition, the investment will enable Maziv to extend fibre infrastructure to an estimated 1 million new households in lower-income areas.

It will also create up to 10 000 new jobs, commit at least R10 billion to capital expenditure, and facilitate the creation of small to medium enterprises through a fund formed specifically for this purpose with R300 million of committed capital.

During the Commission’s investigation, which lasted more than 18 months, both merger parties committed to extensive and robust engagement with the Commission.

“We believe that all concerns raised by the Commission during this process can be adequately addressed by a range of conditions and commitments proposed by the parties,” they said.

“While we have not had the opportunity to study the Commission’s reasons in detail, we are confident that the massive positive impact of the proposed transaction on critical issues like the democratisation of the internet in lower-income areas, as well as growth of the economy will be favourably considered by the Competition Tribunal. CIVH remains committed to achieving approval of the proposed transaction.”