MTN-Verizon deal clears first hurdle
A controversial bid by MTN to pay an estimated R1,4bn to absorb networking company Verizon SA has won approval from the Competition Commission, the first hurdle in a two-part process needed for the deal to go ahead.
Now the Competition Tribunal will look at the deal. It is not clear how much opposition the attempted acquisition faces when it reaches the higher authority.
MTN will be SA’s third-largest internet service provider (ISP) for corporate clients if it buys Verizon’s local operations, giving it a market share of 10%-12%. But one previously fierce opponent, Internet Solutions, has virtually pulled out of the fight to block the bid.
CEO Angus McRobert said previously his company had prepared evidence to fight the takeover, and would prove MTN engaged in anticompetitive behaviour in negotiating interconnection fees and mobile data deals with other ISPs.
McRobert said on Monday Internet Solutions had submitted evidence on market share and lodged an objection, but “we didn’t actively try to stop it. I believe Altech did, so we decided not to. Our team felt there were more important things to worry about so we let Altech do the big fight. We opposed it but not aggressively. We put down our concerns, and said it shouldn’t happen, but we didn’t do a lot of work around it.”
McRobert said he thought the takeover was “a done deal” so opposing it would have wasted time and money. It could not be vetoed on the grounds that MTN would be too dominant in the internet arena as Verizon did not have a large market share.
Altech CEO Craig Venter could not be reached for comment, but Altech is expected to fight the deal at the tribunal, partly as Altech was short-listed as a potential buyer before MTN trumped its offer. “I don’t think Craig will take this lying down,” one source said.
Altech had been optimistic about winning the bid for Verizon as Venter doubted MTN would win approval from the authorities. Yet when the deal was announced, MTN SA MD Tim Lowry said the cellular operator would not be going to all this trouble if its lawyers did not think it would win approval. On Monday, his only comment was that MTN would keep its stakeholders posted as the deal progressed through the tribunal.
The commission’s consent will have surprised another large ISP’s boss, who expected a veto. “You have one of the top corporate ISPs buying another top corporate ISP. With MTN’s voice infrastructure they can cross-subsidise and use unfair cutthroat pricing,” he said.
Verizon SA is a subsidiary of New York-listed Verizon, with 25% of its shares held by local empowerment partner J&J. It has annual revenue of about R400m in Africa, supplying voice and data services to businesses and governments in SA, Zambia, Namibia, Kenya and Botswana.
MTN will fold the business into its internet division, Network Solutions, gaining 140 staff to augment Network Solutions’ 90 staff. It will inherit Verizon customers but not gain networking infrastructure, as Verizon runs its operations on leased Telkom bandwidth. Network Solutions is roughly half the size of Verizon by revenue at R200m a year.
MTN wants to absorb Verizon to expand its pan-African reach and boost its business in SA.
MTN – Verizon Business discussion
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