Bad news for fibre Internet in South Africa

The Competition Tribunal’s blocking of a merger of Vodacom and Remgro-owned CIVH’s fibre businesses will continue to delay critical investment in the sector, which is needed to expand the fast broadband technology.

That is according to South Africa’s third-biggest fibre network operator (FNO) — Herotel.

The blocked deal would have seen Vodacom and CIVH’s Vumatel and DFA pool their fibre networks into a combined entity called Maziv.

With the additional funding from Vodacom, Maziv would have been able to scale up the effort to expand fibre-to-the-home (FTTH) to South African townships at a rapid pace.

Vumatel intends to grow its breakthrough Vuma Key service, which provides 10Mbps uncapped fibre at R99 per month to low-income households earning below R3,000 per month.

It was banking on the Maziv deal getting approved for additional funding for its rollout.

The company’s majority stakeholder Remgro previously said that the delay in approving the transaction — which was first announced in late 2021, had already pushed back investments in township rollouts by a year and a half.

However, after considering evidence from various industry stakeholders and economists, the Competition Tribunal blocked the merger as it found it would create competition issues in the market.

The Tribunal has yet to publish its reasons for the decision, and Vodacom and CIVH have already indicated that they would consider appealing the ruling as soon as the reasons are published.

The rejection of the deal came despite Vodacom and Maziv committing to conditions as part of negotiations with the Competition Commission.

These included commitments that would have resulted in “substantial positive public interest effects” according to the Department of Trade, Industry, and Competition (DTIC), such as:

• Investing at least R10 billion over a 5-year period, predominantly in low-income arexs.
• Passing at least one million new homes in lower-income areas over a 5-year period
• Creating up to 10,000 new jobs
• Establishing 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
• Vodacom investing up to R14 billion into South Africa through the transaction

Putting a damper on investment

Herotel was among several industry stakeholders who provided testimony at the hearings upon the request of the Tribunal.

The company generally operates in towns and small cities overlooked by major FNOs, so it has some experience expanding connectivity beyond the country’s main hubs.

Herotel told MyBroadband that the Competition Commission and Tribunal’s blocking of the deal had delayed critical investment in the fibre sector for almost three years.

It explained that Herotel’s own foundation was a result of consolidation, starting with the merger of 30 companies to gain the scale required to deliver affordable, accessible fibre across South Africa.

“Scale is crucial in telecommunications, and consolidation in this sector supports sustainable growth,” Herotel said.

“To build the infrastructure required for a digitally inclusive future, telecoms also need robust capital, whether from government, local or international sources.”

Herotel pointed out that fibre network construction has slowed down dramatically in 2024 compared to previous years.

Where 1.5 million new homes were passed with fibre in the year ending June 2023, 400,000 new homes were passed.

One of the reasons for the drop is that FNOs had refocused their energies on growing revenues in areas where they already had a presence.

Continuing to roll out at pace did not make sense because many middle-class and affluent suburbs were already packed with broadband connectivity availability — including from FTTH, fixed-LTE, and fixed-5G.

“This downturn directly impacts subcontractors and the construction sector, leading to job losses and reduced industry momentum,” Herotel said.

“Studies consistently show that increased fibre and Internet penetration drives GDP growth, emphasising why government support for telecom infrastructure is important to the national economy.”

Herotel added that restrictions on mergers and acquisitions also reduce the industry’s appeal to investors and risk limiting the capital flows needed for South Africa’s infrastructure growth to bridge the digital divide.

Other views

It should be emphasised that Herotel is 49% owned by Vumatel, so its support for the transaction should be seen within that context.

However, during the Competition Tribunal’s hearings, MTN, Rain, and DTIC gave testimony in support of the deal — provided the right conditions were put in place.

MyBroadband also asked other major FNOs in the country — including Frogfoot, MetroFibre, Octotel, and Zoom Fibre — for their views on the impact of the ruling.

MetroFibre said it would not respond until it had assessed the reasons for the Tribunal’s decision.

Octotel said it would be “business as usual” for its rollout strategy.

“We are still expanding our network reach throughout the Western Cape to ensure that all areas and communities have access to our services,” said Octotel.

Frogfoot and Zoom Fibre had not responded by the time of publication.

Frogfoot founder and former CEO Abraham van der Merwe had expressed concerns over the deal in his testimony to the Tribunal, in particular regarding the acquisition of a stake in DFA.