Business27.01.2025

Big red flag about South Africa

Deal Leaders International CEO Andrew Bahlmann has warned that the Competition Commission is sending a negative message to international investors regarding large corporate deals in South Africa.

Bahlmann was responding to a question on Business Day TV about South Africa’s competition watchdog blocking major deals like the Vodacom-Maziv acquisition.

A proposed deal between Vodacom and CIVH would see the companies pool their fibre networks, with Vodacom owning a 30% to 40% stake in the combined entity, Maziv. CIVH owns Vumatel and DFA.

Vodacom had offered a combination of assets and cash of at least R13.2 billion for a 30% shareholding.

That 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%.

“It’s become a real concern, particularly for these large corporates and these megadeals,” Bahlmann stated.

“We’ve got to realize that if you’ve got large businesses the only way for them typically to grow is to consolidate or acquire other businesses,” Bahlmann explained.

“That’s the only way efficiencies can be passed on to the consumer.”

Bahlman said every deal they’re working on that goes through the Competition Commission has become quite complex and that they must tread carefully.

“So it is definitely a red flag,” he said.

“I do worry that if you take that with all the other risk elements in this part of the world, international investors may see it as an added hurdle in concluding a deal and deploy capital elsewhere.”

Bahlman’s commentary on the Competition Commission’s recent decisions on major deals was diplomatic.

“I think it is one of those situations where the original mandate has become a little bit skewed,” he said.

The Competition Tribunal announced its decision to block the Vodacom-Maziv deal in October 2024 after an extensive hearing that took place over 26 days between 20 May to 27 September last year.

That was after the Competition Commission took 20 months to consider the deal, including back-and-forth negotiations with the parties over conditions to attach to the transaction to address anti-competitive concerns.

Despite the extensive process, the Commission recommended to the Tribunal in August 2023 that the deal not be approved.

The Tribunal then conducted weeks of public hearings, which concluded at the end of September.

Remgro, which has an effective 57% stake in CIVH, and Vodacom announced their intention to appeal the hearing in November.

This was soon followed by the minister of trade, industry and competition, Parks Tau, saying that he was also launching an appeal against the Tribunal’s ruling.

“We are still awaiting the Competition Tribunal’s detailed reasons for prohibiting the transaction,” Vodacom and CIVH stated.

They said their notice to appeal will be supplemented once they have received the Tribunal’s reasons.

Remgro has 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 previously 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 with Vodacom’s cash injection, Vumatel would be able to roll out to most of South Africa’s townships in 3–5 years.

Without the investment, that time horizon balloons to 10–12 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 a cash injection, or it needs to focus on sweating its assets like MetroFibre to pay down some of its debt.

Therefore, Vumatel would first need to generate profit from its existing customer base to reinvest in building township fibre rather than roll it out with borrowed money.

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