Development in R13-billion Vodacom acquisition of Vumatel

The Department of Trade, Industry and Competition (DTIC) is taking legal action against a Competition Tribunal ruling after it blocked a deal between Vodacom and Vumatel parent Maziv.

Vodacom revealed in its annual results released Monday that trade and industry minister Parks Tau’s department has filed an appeal against the Tribunal’s ruling.

Tau previously filed an intention to appeal pending the release of the Tribunal’s full reasons for rejecting the transaction, but it had not been confirmed whether he followed through.

This is an unprecedented development as the Competition Commission and Tribunal are administratively accountable to the DTIC.

The Competition Appeal Court, where the appeal will be heard, is part of the South African judiciary.

Vodacom and Remgro have announced that the Competition Appeal Court has scheduled the hearing for 22 to 24 July 2025.

Remgro said the timelines provided by the court indicate that a ruling is expected by September 2025.

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. Maziv is a subsidiary of CIVH.

Under the original terms of the transaction, Vodacom would pay at least R6 billion cash and contribute its own fibre assets, valued at R4 billion at the time.

Depending on the company’s valuation when the deal closed, it would also pay an additional cash amount.

When the transaction was conceived three years ago, the estimated value was R13.2 billion for a 30% stake. Vodacom also had the option to increase its stake to 40%.

However, Remgro recently informed investors during its latest interim results presentation that, because of the regulatory delays, the whole structure of the deal needs to be renegotiated.

It took nearly three years for the regulatory process to play out.

Nearly three years for a “no”

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 last year, which concluded at the end of September 2024. A month later, it finally rejected the transaction.

It argued, among other things, that the deal would permanently harm competition, resulting in higher tariffs for customers.

It also said Vodacom and Maziv were not being up-front about the real reason for the deal by claiming it was to boost township fibre rollouts.

According to the Tribunal, DFA feared that Vodacom would establish its own fibre and tower infrastructure companies to disintermediate it.

Vumatel, on the other hand, was concerned that Vodacom would cut its prices to increase market share, potentially resulting in a national price war.

“From Vodacom’s side, we found that its rationale is that it wants to have a significant stake in the future fibre revenues of the largest dark fibre and FTTH provider in South Africa,” the Tribunal stated.

A travesty for South Africa

Speaking to the media on Monday, Vodacom CEO Shameel Joosub said it would be a travesty for South Africa if the deal didn’t go ahead.

“The level and scale of investment, with the over R14 billion investment we were putting in, was material to accelerating fibre-to-the-home,” said Joosub.

Responding to a question about what Vodacom would do if its case before the Competition Appeal Court failed, Joosub offered a warning.

“We have a lot of opportunities across the group,” he said. “We will then relook where we invest in fibre, but there are opportunities across all our markets.”

Joosub said that not only do the competitive benefits of their proposed transaction outweigh the risks, their competitors were actually on board.

“It’s important to note that all our competitors who were interveners on the transaction, because of the remedies, encouraged the Competition Tribunal to approve the transaction,” he said.

“There was no reason, in my view, to reject the transaction, and that’s why we are appealing.”

In response to a question about South Africa remaining globally competitive with China rolling out 10Gbps fibre, Joosub said the Tribunal’s decision would also hold that back.

“Just to be clear, satellite is not going to provide capacity of 10Gbps. That’s going to come from fibre. It won’t even come from mobile.”