New details in R13-billion Vodacom-Vumatel deal

The South African Minister of Trade, Industry, and Competition, Parks Tau, has revealed that it cost taxpayers R105,578.05 to file an intention to appeal the Competition Tribunal’s rejection of the Vodacom-Maziv deal.

Responding to a Parliamentary question by EFF MP Ntombovuyo Veronica Mente-Nkuna, Tau said that Vodacom and Maziv had agreed to substantial public interest conditions.

These would have boosted investments and growth of fibre and mobile connectivity in South Africa, Tau stated.

Vodacom announced in November 2021 that it had entered into a deal to buy a stake in the fibre assets of Community Investment Ventures Holdings (CIVH), which owns Vumatel and Dark Fibre Africa (DFA).

CIVH, in turn, is majority-owned by Remgro, which has an effective 57% stake in the business.

The 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.

That combined entity is Maziv, a company established specifically to hold CIVH and Vodacom’s fibre assets and facilitate the transaction.

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%.

The transaction was submitted for regulatory approval, where it languished for years.

The Independent Communications Authority of South Africa approved the deal in November 2022, a year after it was announced.

Although a year would already be considered a long time to wait for feedback on such a transaction, South Africa’s competition authorities took even longer.

After 20 months of back-and-forth negotiations that culminated in a host of conditions that would be attached to the deal, the Competition Commission rejected it.

It recommended to the Competition Tribunal in August 2023 that the transaction be prohibited.

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

A month later, it issued its decision, and the transaction was blocked.

The Tribunal highlighted the fact that Vodacom was South Africa’s biggest mobile network and Maziv one of the biggest fibre infrastructure players as a concern.

However, it said it would publish the full reasons for its decision in due course.

The Competition Act stipulates that the Tribunal should provide the reasons for its decisions within 20 business days of announcing it. It has been over four months.

When MyBroadband previously asked the Tribunal why it did not deliver its decisions within the prescribed period, it said the matter was highly complex.

“In a case such as the Vodacom/Maziv merger, that raises complex competition issues, with multiple theories of competitive harm, both horizontal and vertical,” a Tribunal spokesperson said.

“It also raises complex public interest issues, with inter alia effects on the particular sector and counterfactuals to consider. Therefore, it is not practical to issue reasons within a 20-business-day period.”

Minister, Vodacom, and Maziv lodge appeals

The law also stipulates that appeals against a Competition Tribunal decision must be lodged within 20 business days.

However, the appeal cannot be lodged until the Tribunal has published its reasons.

For this reason, Vodacom, Maziv, and Tau have filed their intentions to appeal pending the release of the Tribunal’s reasons document.

In his recent Parliamentary response, Tau explained that he participated in the merger proceedings on public interest grounds.

He said the conditions Vodacom and Maziv agreed to were in line with South Africa’s priorities for industrialisation and investment to foster economic growth and create jobs.

“Once the Tribunal’s reasons are made available, the Minister will assess and advise whether he will proceed or withdraw the appeal,” Tau’s department said.

Tau explained that he would consider the Tribunal’s reasons for the prohibition against the significant positive public interest outcomes offered by Vodacom and Maziv.