Vodacom and Vumatel face off against Vox and Frogfoot

The Competition Tribunal heard a case on Wednesday where Vodacom and Maziv are seeking access to documents and data that Vox Telecoms and its subsidiary Frogfoot Networks supplied to the Competition Commission.

According to the Tribunal, the information was provided during the Commission’s investigation of Vodacom’s proposed acquisition of a stake in Vumatel and Dark Fibre Africa (DFA).

As part of the deal, the companies created a new entity called Maziv that holds Vumatel and DFA’s assets.

Vodacom would then take a 30% stake in Maziv in exchange for at least R9 billion in cash. It would also pool its fibre assets, valued at R4.2 billion, with Maziv.

The cash consideration includes a fixed R6 billion, with a variable portion depending on Maziv’s valuation when the deal goes through.

Vodacom’s fibre assets that would be added to Maziv’s stable include its residential, business, and tower fibre infrastructure. It excludes Vodacom’s long-distance network.

The companies have assured that Vodacom’s fibre network would immediately become open access, adopting the same wholesale model as Vumatel and DFA.

However, the Competition Commission recommended against the deal being approved.

It raised several red flags in its recommendation to the Competition Tribunal.

Among its concerns was that DFA and Vumatel would give Vodacom preferential wholesale pricing.

Remgro’s head of strategic investments, Pieter Uys, has explained that they built several safeguards into the deal to provide assurances to the market and the Commission that this won’t happen.

Remgro owns 57.03% of Community Investment Ventures Holdings Limited (CIVH), which owns Vumatel and Dark Fibre Africa (DFA). Maziv is technically a subsidiary of CIVH.

Uys also said that Maziv could not give Vodacom preferential treatment because it would be a minority shareholder in the entity.

He said it would make no commercial sense to favour the 30% shareholder at the cost of the 70% shareholder.

Another concern the Commission raised was that the deal would lessen competition between 5G and fibre-to-the-home.

This was a curious conclusion to draw, as the Competition Commission did not clarify how it believes Vodacom would be able to shirk the obligations that came with its recently acquired radio frequency spectrum licences.

The next step is for the Competition Tribunal to consider the case, including the Competition Commission’s input, and decide whether the transaction should be allowed.

Access to documents

The dispute between the merging parties and Vox centres around data that the Competition Commission relied on to arrive at its negative recommendation.

During the hearing, Vox’s representative, Adv Shannon Quinn, revealed that the information includes costs, prices, market shares, volumes, revenues, and pricing in the fibre-to-the-home and business fibre markets.

According to Vodacom and Maziv’s legal representative, Vox has only agreed to provide access to the information under “absurd” conditions.

He said that Vox would not provide copies of the confidential information for Vodacom and Maziv’s legal advisors and economists, instead insisting that they view the documents at Vox’s premises or those of the Competition Commission.

This is impractical given the volume of data and logistically untenable as some of their advisors are in London.

However, Quinn disputed the accuracy of this.

First, he argued that Vox’s approach to handling access to its confidential information is supported by all the case law Vodacom and Maziv cited in its application to the Competition Tribunal.

He said Vox offered to make the documents available at its own cost in London for the merging parties’ advisors to inspect.

Vodacom and Maziv’s representatives then came back and said they also have advisors in Stellenbosch.

Once again, Vox offered to make the documents available for inspection in Stellenbosch at its own cost.

“Every time my client accommodated the merging parties, they moved the goalposts,” Quinn stated.

The Competition Tribunal has said it will rule on the practicality of Vox’s approach.

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Vodacom and Vumatel face off against Vox and Frogfoot