Vodacom considers appeal against Competition Tribunal blocking Vumatel deal

Vodacom said it could appeal the Competition Tribunal’s decision to block a proposed transaction where the mobile operator hoped to acquire a stake in Vumatel and DFA’s parent company for a combination of cash and assets.

“I am deeply surprised and disappointed by the Tribuna’s decision,” said Vodacom Group CEO Shameel Joosub.

“South Africa desperately needs additional significant investment, especially in digital infrastructure in lower-income areas.”

Joosub said their investment of up to R14 billion would have changed millions of lives and created thousands of jobs.

“This comes after the concerns of our competitors, involved in the Competition Hearings process, and the Department of Trade, Industry and Competition (DTIC) were comprehensively addressed through remedies and commitments by the parties.”

Vodacom said that during the Tribunal’s public hearings, which concluded last month, the DTIC described the transaction as having “substantial positive public interest effects”.

This was on the basis that Vodacom and Vumatel’s parent company, Community Investment Ventures Holdings (CIVH), committed to:

• Invest at least R10 billion over 5 years, predominantly in low-income areas
• Pass at least one million new homes in lower-income areas over 5 years
• Create up to 10,000 new jobs
• Establish a R300-million enterprise and supplier development fund to prioritise SMME development
• Providing high-speed Internet to over 600 adjacent schools and police stations at no cost

Under the terms of the proposed transaction, Vodacom had offered a combination of assets and cash of at least R13.2 billion for a 30% shareholding in Maziv.

Maziv was established to pool Vumatel, DFA, and Vodacom’s fibre assets to facilitate the transaction.

Vodacom’s purchase price included an initial cash consideration of R6 billion, Vodacom’s fibre assets worth R4.2 billion, and a secondary purchase based on CIVH’s valuation when the deal went through, estimated to be roughly R3 billion.

Vodacom also had the option to increase its stake to 40%.

Remgro, which has an effective 57% stake in CIVH, previously warned that without Vodacom’s investment, Vumatel’s initiative to roll out fibre to South African townships would face significant delays.

Vumatel commercially launched its Vuma Key service in Alexandra and Kayamandi in mid-September, offering uncapped fibre services from R99 per month.

Remgro CEO Jannie Durand stated that, had the Vodacom deal been approved 18 months ago, CIVH would have already invested an additional R3 billion to R4 billion in its fibre networks — most of that in townships.

Pieter Uys, Remgro’s head of strategic investments, previously told MyBroadband that without Vodacom’s cash injection, it would take 8–10 years for Vumatel to roll out to all of South Africa’s townships.

With a cash injection, that time horizon improved significantly to around 3–4 years.

This is because Vumatel’s balance sheet is tapped out. CIVH currently has around R20 billion in debt, most of which belongs to Vumatel.

The company either needs outside investment, or it must focus on sweating its assets like MetroFibre to pay down some of its debt.

Vodacom and Maziv have said they await the Tribunal’s reasons for prohibiting the transaction to consider their options.

Maziv said it was disappointed by the outcome but respects the Tribunal’s process.

Vodacom’s statement was more stern.

“Vodacom awaits the Tribunal’s detailed reasons for prohibiting the transaction in due course, before considering all options to Vodacom, which may include an appeal in the Competition Appeal Court,” it said.