Rand Swiss founder Gary Booysen said it is not the end of the road for Vodacom’s deal to buy Remgro’s fibre businesses, as the companies can still take their case to the Competition Tribunal and Competition Appeal Court.
Booysen’s comments come after the Competition Commission rejected Vodacom’s acquisition of a minority stake in Remgro’s unit.
This deal involves Vodacom holding a 30% to 40% equity interest in Maziv Proprietary Limited, which holds the material assets owned by Remgro subsidiary Community Investment Ventures Holdings (CIVH), including Vumatel and Dark Fibre Africa (DFA).
The final decision on this transaction – valued at R13.2 billion – has been referred to the Competition Tribunal, whom the commission urged to block the deal.
“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.
“Further, the public interest commitments provided by the merger parties do not outweigh the competition concerns.”
However, Booysen told Moneyweb Now that the tribunal will likely overturn the commission’s decision. In addition, should this not happen, Vodacom has another remedy at its disposal, as it can appeal the decision at the Competition Appeal Court.
Booysen said the Competition Commission’s decision to block the deal is ‘strange’.
On the one hand, he said he understands the commission’s fears about how this deal could impact competition in this space, where fibre competes directly with fixed wireless access.
“From a horizontal perspective, the commission’s investigation shows that 5G Fixed Wireless Access (FWA) and fibre compete in the same relevant market and that consumers stand to benefit from increasing competitive rivalry between FWA and fibre,” the commission said.
“The proposed merger will result in the loss of direct competition between Vodacom and Maziv in the areas where both Vodacom and Maziv have deployed fibre.”
Its investigation also showed that fibre players tend to reduce prices in areas where more than one fibre network provider has deployed fibre.
“This price competition is lost with the merger,” it said.
“Importantly, the proposed merger is also likely to result in the prevention or lessening of future competition in relation to fibre and 5G FWA.”
The Competition Commission said Maziv and Vodacom have significant pre-merger plans to expand coverage, particularly in underserved low-income areas.
“Vodacom, through its spectrum allocation obligations, and Maziv, through its planned Vumatel rollout plans, are both investing in infrastructure rollout to target underserved low-income and more rural consumers,” it said.
“These expansion plans would bring benefits of price competition and consumer choice to underserved or unserved consumers.”
It concluded that the proposed merger would likely prevent or lessen this competitive rivalry and deprive low-income consumers of the benefits that fixed competition exerts on mobile products.
However, Booysen said it is strange for the Competition Commission to say that these commitments would “fall away” due to the merger.
“Vodacom has commitments based on a spectrum allocation to roll out to low-income areas, and those commitments remain in place whether this deal goes through or not,” he said.
Yet, the Competition Commission cited this obligation as one of the reasons that the deal should be blocked.
Booysen also questions whether blocking this deal will reduce competition “because there are natural monopolies within these telcos”.
“Do you want to roll out parallel fibre networks or just build infrastructure once? What is more efficient for an economy?” he questioned.
“I think this decision might be overturned at the Competition Tribunal or the Competition Appeal Court because there are significant commitments and, ultimately, if Remgro and Vodacom make enough commitments, it should overturn the deal.”
‘It’s not over’
This view is shared by Vodacom and Vumatel-owner Maziv, which have said they will make their case before the Competition Tribunal to allow the two companies to merge their fibre networks.
“While we are disappointed, it is important to note that the Commission’s recommendation is not the end of the process,” Maziv stated.
Maziv said it firmly believes the transaction will deliver substantial benefits to South African consumers and the economy.
“Vodacom’s planned investment in excess of R10 billion holds particular significance as a considerable proportion will be focussed on developing new fibre infrastructure at a time when attracting capital investment is particularly challenging,” Maziv said.
“The transaction will be hugely 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, Maziv said the investment would allow it to extend fibre infrastructure to an estimated 1 million new households in lower-income areas, create up to 10,000 new jobs, and commit at least R10 billion to capital expenditure.
“[The investment] would also facilitate the creation of small to medium enterprises through a fund formed specifically for this purpose with R300 million of committed capital,” it said.
Maziv said it believes all of the Competition Commission’s concerns could be addressed by the conditions and commitments they proposed with Vodacom.