MTN faces flak over Verizon purchase
A DEAL for MTN to absorb the African operations of networking company Verizon will transform the cellular giant into SA’s third-largest internet service provider for corporate clients.
The acquisition was confirmed yesterday after MTN emerged as the winning bidder, trumping its rival suitor Altech. MTN was not saying how much it would pay, although sources have cited R1,4bn.
But it is far from a done deal, with rival internet service providers preparing to object when the parties apply for Competition Commission approval.
“We have taken advice from our competition experts and they believe it will be cleared. We wouldn’t go to the time and trouble if our lawyers advised us it has no chance of clearance,” said MTN SA MD Tim Lowry.
Internet Solutions is already preparing evidence to block the deal, with CEO Angus MacRobert saying MTN would be able to augment the anti competitive tactics it already employs.
One dubious practice was for MTN to charge ISPs higher rates for data capacity on its network than it charged its own retail customers, he said.
Lowry acknowledged that it would face some objections, and said the authorities would have to decide if protesters genuinely feared that the move was bad for the market or whether they were just filibustering to delay or sabotage the deal.
Verizon provides voice and data services to companies in SA, Namibia, Botswana, Zambia and Kenya, and MTN will fold those into its own smaller internet division, Network Solutions. That would add 140 staff to Network Solutions’ 90 staff, and see it inherit Verizon’s customers.
The deal will not buy MTN any additional networking infrastructure, as Verizon runs its operations on bandwidth leased from Telkom.
Verizon is 70% owned by its US parent company and 30% by local black investors the J&J Group, which will now bow out of the picture.
“MTN is fully compliant with the empowerment requirements in SA and it’s better for us to have 100% ownership of a company if we wish to integrate it,” said Lowry.
MTN is striking the deal to expand its pan-African capabilities and to boost its business in SA. It supplies internet services in SA, Nigeria, Cameroon, Uganda and Rwanda, and its pan-African customers want the same service in every country.
In SA, the move will bulk up Network Solutions from its turnover of R200m a year, which it earns from customers including SA Breweries and Avusa. With Verizon folded in, MTN will claim 10% to 12% of the corporate internet market, ranking third behind Telkom and Internet Solutions.
Frost & Sullivan analyst Lindsey McDonald said this was another example of MTN’s smart expansion decisions. Telecoms players had to offer a wider range of services to business clients.
MTN-Verizon deal – give your views
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