Fibre16.01.2025

Secrecy around South Africa’s multi-billion-rand fibre deal

The Competition Tribunal has kept the South African telecoms industry in the dark over its decision to block Vodacom’s multi-billion-rand acquisition of a 30% stake in Maziv, the parent company of Vumatel and DFA.

The Tribunal prohibited the transaction in a ruling on 29 October 2024, aligning with the Competition Commission’s recommendation.

The decision surprised many in the industry, who had believed the deal’s conditions were sufficient to get the green light.

The transaction is regarded as a critical step in accelerating fibre-to-the-home (FTTH) rollouts in South Africa, specifically to lower-income communities.

Vumatel views townships and informal settlements as its next major FTTH frontiers. It argues that middle-class and high-income neighbourhoods have become congested with uncapped broadband options.

It has already launched more affordable Vuma Reach and Vuma Key products for these segments. The latter was rolled out to Alexandra in September 2024, with packages starting from R99 per month for a 10/5Mbps connection.

Vumatel has passed over two million homes with FTTH in a decade, with nearly one million of these connected to its network.

However, its impressive rise to South Africa’s dominant FTTH player has required that it take on significant debt, which stood at R20 billion last year.

Vodacom’s acquisition would provide a critical R13 billion in funding for continuing Vumatel’s rollouts while keeping its costs under control.

If the deal does not go through, it could delay broadband expansion in South Africa.

Despite the deal’s potential critical role, experts and stakeholders have been left to speculate about the reasons for the prohibition for more than two and a half months.

According to Tribunal Rule 35(5)(b), the entity must provide its written reasons for a decision on mergers within 20 business days.

That means the reasons should have been published by the end of November 2024.

Well over 53 business days have passed since the Tribunal’s decision and Vodacom, Maziv, and the rest of the industry are still awaiting the reasons.

The seemingly slow progress could raise questions over the Tribunal’s capability to effectively and timeously deliver on its mandate.

The Competition Commission itself has also been accused of rushing through its recommendation that the deal be blocked.

Disgruntled employees made serious allegations against Commissioner Doris Tshepe in a letter to former trade minister Ebrahim Patel.

They accused Tshepe of negligence and underperformance, alleging that new cases were not being initiated and old cases remained stuck in the investigation phase.

It took the commission an unusually long 20 months to make its recommendation against the deal, which came despite the parties working with the commission on conditions that would help mitigate competition concerns.

These were sufficient to satisfy the concerns of MTN, Rain, and the Department of Trade, Industry, and Competition (DTIC).

Tshepe has also been accused of not spending enough time to fully understand cases and splurging on international trips, catering for internal staff meetings, conference dinners, and year-end functions, in disregard of the Public Finance Management Act and National Treasury instructions.

Impractical to publish reasons after 20 business days — Spokesperson

In late November 2024, Competition Tribunal spokesperson Gillian de Gouveia told MyBroadband that the Vodacom-Maziv Murger raised complex competition and public interest issues that made the publication of reasons after 20 business days impractical.

“The hearing took place over 26 days and 19 factual and expert witnesses gave oral evidence,” De Gouveia said.

“The record comprises at least 21,944 pages, the trial bundle comprises at least 14 307 pages (excluding other annexures and heads of argument), and the heads of argument filed by the various parties comprise 555 pages.”

De Gouveia said the panel members were in the process of drafting the reasons and were also dealing with multiple other cases.

At the time of publication, the Tribunal’s website showed its oldest case with no published reasons was decided on 9 December 2022. This was for Shoprite’s acquisition of Massmart’s Massfresh stores.

Aside from the Vodacom-Maziv merger, there were five other cases with reasons pending for more than 20 business days.

The fibre deal was the only transaction that was prohibited, while all the other mergers were approved.

While the DTIC is reportedly appealing the decision, neither Vodacom nor Maziv have confirmed intentions to do the same.

Both companies first want to study the reasons for the deal being blocked.

Vodacom said it had not yet received any timeline from the Competition Tribunal on the publication of the reasons.

“However, we acknowledge that the matter is complex and have sought to give the Tribunal the space and time needed to fully articulate the reasons for their prohibition order,” Vodacom said.

Maziv communications head Suveshnan Arumugam told MyBroadband that the firm had also not received a date for the publication of the reasons but expected they would be published “as a matter of urgency.”

“This would serve the public interest and enable the merging parties to thoroughly assess the
decision,” Maziv said.

“Maziv remains of the view that the merger would be highly beneficial for the country,
especially lower-income households, in terms of fibre infrastructure investment, job
creation and SMME development.”

“The merger would greatly contribute to bridging the digital divide and providing affordable internet access to all South Africans.”

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