The Competition Tribunal of South Africa has approved the acquisition of Vumatel by the Remgro-owned Community Investment Ventures Holdings (CIVH).
Following this acquisition, CIVH will have sole control of Vumatel in addition to Dark Fibre Africa (DFA), which it already has a controlling stake in.
DFA builds and runs fibre infrastructure and then leases it to last-mile fibre providers such as Vumatel. In-turn, Vumatel provides fibre access to ISPs, which offer Internet through this infrastructure to the public.
The Competition Tribunal began investigating this deal in April 2019 following a complaint by Octotel, a competiting fibre infrastructure provider which is prominent in Cape Town and indirectly owned by Remgro.
Octotel claimed that DFA is the largest backhaul provider in South Africa, meaning that it being owned by the same company as Vumatel would be a vertical competition concern.
CIVH also controls SA Digital Villages (SADV), a fibre-to-the-home and Internet service provider specialising in the installation and operation of fibre networks in residential areas.
Concerns and conditions
In its statement approving the acquisition of Vumatel, the Tribunal listed a number of concerns and conditions of the merger.
The Competition Commission raised vertical competition concerns while it evaluated the merger, as it found that DFA is considered to be the largest backhaul provider, assessed on a regional basis.
It also raised concerns regarding horizontal competition, due to Remgro’s indirect control of competing fibre provider Octotel.
Octotel relies on DFA to provide it with backhaul services in the Western Cape, and raised concerns regarding the potential favouring of Vumatel by CIVH and DFA at the expense of rivals.
Octotel subsequently was permitted to make submissions to the Tribunal as an “intervenor”, and implored the organisation to prohibit the acquisition of Vumatel by CIVH.
The transaction was approved, although this decision does come with a number of conditions attached to enure continued competition in the fibre infrastucture market.
“The Tribunal has approved the transaction subject to conditions which require that the Merged Entity retains an open access service provision model for certain of its services post-merger, as well as increased transparency mechanisms and an obligation not to discriminate against its customers who compete with Vumatel,” the organisation stated.
“The conditions also include two public interest obligations, one of which is confidential due to business sensitivity.”
“The other provides for the merging parties to provide free uncapped fibre services to public and private schools that its networks bypass,” The Tribunal said.
The conditions of the acquiisition will apply for a period of 10 years from the date of the implementation of the merger.
CIVH’s portfolio would look as follows after the acquisition of Vumatel by the company.