Rain fears Vodacom deal with Vumatel could undermine competitors

Rain believes Vodacom could influence Maziv, and therefore Dark Fibre Africa (DFA), to share confidential information, offer competitors inferior terms for its services, and prioritise Vodacom’s infrastructure rollout over others if its deal with Vumatel is allowed to proceed.

This is according to its intervention application argument presented before the Competition Tribunal on Friday, 10 November 2023.

The Competition Tribunal held the hearing for MTN and Rain to argue their interest in the transaction and explain why they should be allowed to provide input during upcoming hearings regarding the deal’s approval.

The two operators don’t necessarily want to oppose the deal but rather to ensure that the conditions they would like to see in place are put before the Tribunal.

Advocate Piet Olivier presented Rain’s argument before the Competition Tribunal.

“What’s primarily relevant for the purposes of this application, is its relationship as a retail competitor,” said Olivier.

“Both Vodacom and Rain provide mobile retail services in the sense that when you go out and buy a cellphone and the accompanying SIM card, you can choose to buy a Rain SIM card or a Vodacom SIM card.”

He added that Rain’s customer relationship with Maziv makes it dependent on the infrastructure it leases from DFA.

“The relationship with Rain and Maziv, and in particular, Dark Fibre Africa, is a customer relationship,” said Olivier.

“Rain leases a significant amount of infrastructure from DFA, and as a result, Rain is heavily dependent on the infrastructure that it leases from DFA in order to provide the retail services that it provides to members of the public.”

He noted that Rain can also be considered a competitor to DFA but said its customer relationship is relevant for its application.

Olivier said that post-merger, Vodacom will acquire joint control of Maziv, and therefore of DFA, and thus influence their decisions.

He also noted that Vodacom will acquire an interest in DFA’s growth.

“That will have three competitive effects that are relevant to Rain,” said Olivier.

He listed these effects as follows:

  1. Vodacom will have an incentive and the ability to influence the conduct of Maziv to undermine Vodacom’s competitors, including Rain.
  2. Vodacom will be incentivised to grow Maziv in a way that benefits Vodacom over its competitors, including Rain.
  3. Maziv will have less incentive to service non-Vodacom clients because it will be assured the business of its anchor customer, Vodacom.

Olivier said Rain believes that Vodacom could influence DFA to prioritise infrastructure rollout to suit Vodacom and not its competitors and offer its services to competitors on inferior terms.

“Rain explains in the founding papers how Rain has received declining mean time to repair [MTTR], from Dark Fibre Africa in the recent past, while the MTTRs offered by DFA, on average, have improved,” he added.

He also noted that, due to its close supplier-customer relationship with DFA, Rain shares highly confidential information with DFA, which raises concerns about information sharing.

“Specifically, Rain tells DFA where it intends to expand its service offering so that DFA can expand its infrastructure in those areas,” said Olivier.

“What could happen post-merger is that Vodacom could influence Dark Fibre Africa to share this information with Vodacom, and Vodacom could then use this information to build infrastructure there before Rain and undermine Rain’s first-mover advantage.”

While the Independent Communications Authority of South Africa approved the deal, the Competition Commission voiced its concerns and recommended against it being approved.

The Competition Tribunal will consider the deal, the Competition Commission’s recommendations, and Rain and MTN’s intervention applications to decide whether the deal should be approved. The final hearing date is set for 20 May 2024.

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Rain fears Vodacom deal with Vumatel could undermine competitors