Vodacom, Vumatel deal will fast-track fibre to 1 million township homes

Remgro strategic investments head Pieter Uys has told MyBroadband he’s hopeful they will get a positive result when they get to sit down and talk through the details of their proposed Vodacom-Maziv deal with the Competition Tribunal.

This comes after the Competition Commission refused its approval for the transaction on Tuesday.

Maziv is a new holding company established to house the fibre assets of Community Investment Ventures Holdings Limited, which owns Vumatel and Dark Fibre Africa (DFA).

It was established specifically for the deal, or a deal like it, allowing Vodacom to take a stake in the company in exchange for R9 billion cash and its fibre-to-the-home (FTTH) assets, valued at R4.2 billion.

Remgro owns an effective 57% interest in CIVH.

If the deal closes, Vodacom would own a 30% co-controlling stake in Maziv, with the option to extend that to 40%.

Vumatel is currently South Africa’s largest FTTH network operator, having overtaken the country’s partially state-owned and former fixed-line monopoly, Openserve (Telkom), in 2019.

Uys said he couldn’t say anything negative about the Competition Commission, as it is an essential watchdog that is trying to do its job.

“If there is one negative I could mention, it’s that there wasn’t an interactive component to the process,” he said.

Uys explained that they had been exchanging documents with the Competition Commission for over 18 months, ultimately responding to 14 separate requests for information from the regulator.

He believes it would have worked well if they could’ve met with the evaluators and hashed out all of their concerns in an in-person meeting.

“There are no issues that’s been raised by anybody out there — [by] third-parties and the Commission —that I do not personally know [we could] solve through an obligation commitment we can make,” Uys said.

For this reason, Uys said he is excited about the Competition Tribunal hearings as it will give them an opportunity to argue their case in an interactive forum.

Although the transaction is considered a merger in terms of competition law, Uys said it isn’t really a merger.

He said a more accurate characterisation is that Vodacom is becoming a financial investor in Maziv.

In many ways, it is similar to how Telkom used to own a stake in Vodacom.

Vodacom and CIVH are not merging into a new entity called Maziv — the two companies are pooling their last-mile fibre resources. It also won’t be all of Vodacom’s fibre assets.

Uys said the deal would increase competition and allow Vumatel to fast-track its fibre investments.

Without an additional cash injection from a company like Vodacom, Maziv could only invest R10 billion over the next ten years.

Uys explained that Remgro initially tried to attract foreign investment, mostly from financial institutions, and was in positive talks between 2018 and 2020.

However, when the Covid–19 pandemic hit, the international investors vanished. He said attracting foreign investors in the current climate has been challenging.

Uys also said the company’s debt stood at around R20 billion, so it isn’t possible to take out more loans to build out infrastructure. “We are at the maximum,” he told MyBroadband.

With Vodacom at the table, Maziv could substantially accelerate the pace of its fibre investments — speeding up the timeline to R10 billion in around three years.

And Maziv won’t simply stop investing after three years, either.

Part of this investment is the rollout of uncapped, sub-R100 per month fixed-line broadband to at least a million lower-income households.

Uys becomes animated when he discusses their rollouts in Mitchells Plain, Soweto, and Alexandra.

“South Africans in these communities have been left disconnected from the rest of the world,” Uys said.

While they have had access to mobile data on 3G, 4G, and soon 5G — and some communities are served by alternative wireless Internet service providers — these are either too expensive for those communities or not genuinely uncapped.

An uncapped broadband connection providing speeds of at least 20Mbps for under R100 per month on a prepaid basis is life-altering for lower-income households.

“Children in these communities were already disadvantaged — this got much worse during the Covid–19 pandemic when their schools closed while kids in wealthier schools could continue,” Uys said.

Affordable uncapped Internet gives people access to a wealth of freely available educational resources on platforms like YouTube, where children can get learning support for schoolwork, and anyone can learn new skills from experts sharing their knowledge.

Uys said that South Africa’s fibre history also shows that when one player starts investing in an area, it creates a flood of competition.

Vumatel is already seeing competitors like Openserve, Metrofibre, and Frogfoot launching in townships, as well as a proliferation of smaller operators like eKasi fibre, Illitha, and Isizwe.

Increasing the investment in those areas will further spur investments from competitors, Uys argues.

He also said it’s incorrect to think that Vodacom would not roll 5G to lower-income areas where Maziv has fibre and vice-versa.

“Vodacom will only be a 30% shareholder [with the option of increasing to 40%],” Uys explained.

“The other 70% of shareholders will want Maziv to compete.”

Similarly, Vodacom has shareholders who want the company to sell services to as many people as possible — not to mention the conditions attached to its recently-acquired spectrum licences.

Uys said Vodacom was also willing to provide the Competition Commission with additional coverage guarantees for lower-income and underserved communities.

Regarding when the Competition Tribunal will hear the case, Uys said that within ten days of the Commission’s recommendation, they must have the first meeting where the panel at the Tribunal will be announced.

“It could take long because there could once again be lots of people raising issues, which we will then address,” Uys stated.

“But those will be addressed in a much more interactive formal way — like being in court — you will have a chance to almost negotiate something until everyone is happy.”

As for what the chances are that the Competition Tribunal will go against a recommendation from the Commission, Uys’ co-director on the Remgro investment portfolio, Craig Caesar, said it does happen.

“There have been nine to ten such cases, of which two were large mergers,” Caesar said.

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Vodacom, Vumatel deal will fast-track fibre to 1 million township homes