Competition Tribunal “shocker” over R13-billion Vumatel-Vodacom deal

Pieter Uys, head of strategic investments at investment holding company Remgro, has slammed the Competition Tribunal’s rejection of the merger between Maziv and Vodacom, describing the deal as a “no-brainer”.

The deal would have seen Vodacom acquire a 30% stake in Maziv, estimated at R13 billion, with the option to increase its holding to 40%. The goal was to pool resources and bring fibre connectivity to rural areas and townships.

Maziv will spend R10 billion over the next half-decade to expand fibre access to at least one million homes. The partnership with Vodacom would add a further R15 billion and significantly increase the number of homes.

The combined entity of Maziv comprises Vumatel and Dark Fibre Africa and falls under parent company Community Investment Ventures Holdings (CIVH), in which Remgro holds an effective 57% stake.

According to the Sunday Times, Uys described the news that the Tribunal upheld the Competition Commission’s recommendation to reject the deal as a “complete shocker.”

He said the deal is a perfect example of the kind of infrastructure investment President Cyril Ramaphosa mentions during his State of the Nation Address each year.

“This is not the message we want to send out to the world,” Uys told the paper.

He added that it is unacceptable to leave companies that want to invest billions in South Africa in limbo for three years.

“With the tie-up we’d be able to do in three to five years what would otherwise take 10-12 years,” said Uys.

However, he said this would be unlikely if the deal didn’t happen and Vodacom’s parent, Vodafone, decided to inject the R15 billion into another “investor-friendly” country.

The Competition Commission blocked the proposed merger in late October 2024. It said the move would have combined South Africa’s largest mobile operator, Vodacom, with its largest fibre infrastructure player, Maziv.

“In terms of the proposed transaction, Vodacom intended to acquire a certain shareholding in Maziv and to sell certain assets to Maziv,” it said.

The Tribunal’s decision came after an extensive hearing that took place over 26 days between 20 May and 27 September 2024.

“The parties also made further written submissions after this, the last of which was received by the Tribunal on 16 October 2024,” it said.

The Tribunal said it heard evidence from various witnesses, including the merging parties, Frogfoot, MTN, Rain, and Telkom.

“At the Tribunal’s request, Hero Telecoms (i.e. Herotel) also provided factual testimony,” it stated.

“In addition to the factual witnesses of the abovementioned firms, four economic experts presented evidence on behalf of the Competition Commission, the merging parties and MTN.”

The Tribunal said it would publicise the reasons for its decision in due course.

Vodacom has said it would consider appealing the Competition Tribunal’s decision, with CEO Shameel Joosub saying it deeply surprised and disappointed him.

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

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,” the Vodacom CEO stated.

Vodacom and CIVH submitted the proposed merger to the Competition Commission and the Independent Communications Authority of South Africa (Icasa) in late 2021.

Icasa approved the transaction just under a year later. However, the Competition Commission took its time.

Following 20 months of negotiations that resulted in various conditions being attached to the deal, the Competition Commission rejected it.

It recommended that the Competition Tribunal prohibit the transaction in August 2023, after which weeks of public hearings followed.