MTN supports Vodacom’s deal with Vumatel — but with strict conditions

MTN believes it will be unable to compete with Vodacom should its deal to acquire a stake in Vumatel’s parent company Maziv be approved without conditions.

For that reason, it must be able to give input on what conditions the Competition Tribunal should impose.

This was one of the network operator’s arguments against the deal during the Competition Tribunal’s hearing of MTN’s intervention application on Friday, 10 November 2023.

The hearing saw MTN and Rain argue their interest in the deal and why they should be granted the right to provide inputs during the subsequent Tribunal hearings about whether it should allow the deal to proceed.

The two operators don’t necessarily want to oppose the deal. Instead, they want to ensure that the Tribunal hears and considers the conditions they would like to see put in place.

Advocate Robin Pearse, representing MTN, argued that his client has a material interest at two levels:

  • As a competitor that may become incapable of competing with Vodacom and Vumatel should the merger be approved.
  • As a customer that buys access on longer distance links from Dark Fibre Africa.
  • As a customer and partner that sells and resells fibre-to-the-home and fibre-to-the-business services.

For reference, Remgro owns 57.03% of Community Investment Ventures Holdings Limited (CIVH), which owns Maziv, which owns Vumatel and DFA.

MTN sells Vumatel fibre-to-the-home (FTTH) and fibre-to-the-business (FTTB) services and uses long-distance access routes and last-mile links from DFA.

Pearse argued that MTN would face a supplier of those services with substantially different incentives should the merger be approved.

“The merged entity’s incentives would change significantly because it would make it favour the connectivity of Vodacom over MTN and Rain,” he said.

However, Vodacom and Maziv say they have agreed to wide-ranging and substantial conditions on the deal to assuage these fears.

The Competition Tribunal’s intervention applications hearing is a precursor to the final hearing on the proposed transaction between Vodacom and Maziv, tentatively set for 20 May 2024.

The proposed deal, if approved, will see Vodacom take a 30% stake in Maziv in exchange for at least R9 billion in cash, and fibre assets to the value of R4.2 billion.

The fibre assets would comprise Vodacom’s residential, business, and tower fibre infrastructure. However, it excludes Vodacom’s long-distance network.

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

Remgro head of strategic investments Pieter Uys told MyBroadband that the merger between Maziv and Vodacom would significantly speed up its fibre rollout to underserved areas.

While Vumatel could continue deploying infrastructure without the additional investment, a national rollout would take approximately ten years to complete.

However, Vodacom’s investment could cut the timeframe to three years.

While the Independent Communications Authority of South Africa approved the deal, the Competition Commission raised several red flags and recommended against it being approved.

The Competition Tribunal will now consider the case and the Competition Commission’s input to decide if the deal should be approved.

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MTN supports Vodacom’s deal with Vumatel — but with strict conditions