Blow to Remgro and Vodacom

The Competition Tribunal issued an order prohibiting Vodacom’s investment in Vumatel and DFA-owner Maziv, which is a blow to Remgro and Vodacom.

The Tribunal’s decision to prohibit the merger followed hearings that lasted 26 days, from 20 May to 27 September 2024. It said it would provide reasons for its decision in due course.

Community Investment Ventures Holdings (CIVH) is one of Remgro’s key investments. The company is active in the telecommunications and information technology sectors.

Its operating companies are Dark Fibre Africa (DFA) and Vumatel, which construct and own fibre-optic networks.

Following an internal restructuring in 2023, DFA and Vumatel are held under Maziv, a newly formed wholly-owned subsidiary of CIVH.

Maziv houses Vumatel and DFA, while Vumatel holds a 49.96% stake in Herotel, a South Africa-based Internet service provider.

Remgro has an equity interest of 57% in CIVH, and the company contributes 10.6% to Remgro’s net asset value.

Vodacom and CIVH struck a deal where the companies would partner to accelerate fibre rollout across South Africa.

The process started in November 2021 after Vodacom signed a deal to buy a stake in Maziv, which owns Vumatel and DFA.

Vodacom planned to acquire up to 40% of Maziv through a combination of assets of R4.2 billion and cash of at least R6.0 billion.

Vodacom explained that this partnership would increase fibre connectivity in South Africa and drive digital inclusion.

It explained that its investment would accelerate the rollout of affordable fibre access in some of the country’s most vulnerable areas.

In October 2022, the Independent Communications Authority in South Africa (ICASA) approved the transaction.

However, the Competition Commission dragged its feet on the matter, which caused fibre rollouts to stall nationwide.

In August 2023, the Competition Commission announced its recommendation to the Competition Tribunal to prohibit the transaction.

Competition Tribunal hearings

This year, Vodacom, CIVH, and other stakeholders presented their case before the Competition Tribunal.

Vodacom and CIVH highlighted that the deal has many benefits, including making Vodacom’s fibre assets open access.

Vodacom’s fibre assets that would be added to Maziv’s stable include its residential, business, and tower fibre infrastructure. It excludes Vodacom’s long-distance network.

The biggest benefit is that Vodacom’s money will strengthen Maziv’s balance sheet and give it the breathing room to invest in further fibre rollouts.

Vodacom said it showcased “the strong public interest and pro-competitive advantages of our proposed joint venture”.

Blocking the deal, which has now happened, has many negative effects, including reduced investment in fibre infrastructure.

Many fibre network operators (FNOs) invest in infrastructure with the hope of being acquired when they reach a certain scale.

The Competition Tribunal ruling adds risk to this business model, which can significantly reduce the money flowing into fibre rollouts in South Africa.

It also contradicts President Cyril Ramaphosa’s call for companies to invest in South Africa and his claim that the country is open for business.

Maziv said it has acknowledged the recent decision by the Competition Tribunal prohibiting the proposed merger between MAZIV and Vodacom in a brief statement.

The company said it is disappointed by the outcome but respects the Tribunal’s process.

“We will await the reasons for the prohibition in order to consider our options and remain committed to driving innovation and economic growth through the power of connectivity,” Maziv said.

Vodacom and Maziv consider appealing the Competition Tribunal’s verdict 

Vodacom CEO Shameel Joosub said he was “deeply surprised and disappointed” by the Competition Tribunal’s decision.

“South Africa desperately needs additional significant investment, especially in digital infrastructure in lower-income areas,” he said.

“Our investment of up to R14 billion would have changed millions of lives and created thousands of jobs.”

He explained that Vodacom and Maziv addressed all the concerns of their competitors and the Department of Trade, Industry and Competition (DTIC).

Vodacom now awaits the Tribunal’s reasons for prohibiting the transaction before considering all options, which may include an appeal in the Competition Appeal Court.

Maziv said that it was disappointed by the outcome but respects the Tribunal’s process.

“We will await the reasons for the prohibition to consider our options and remain committed to driving innovation and economic growth through the power of connectivity,” it said.