South Africa's Competition Tribunal has prohibited a proposed merger deal worth $790 million between telecoms operator Vodacom and fiber company Maziv.
The proposed merger would have given Vodacom exposure to one of the country's largest fibre infrastructure players, while providing Maziv with the necessary capital to continue rolling out fibre, especially into lower income areas.
The Competition Tribunal, which makes the final ruling on deals, said in a statement that its reasons for the decision will be issued in due course.
In a statement, Vodacom, majority-owned by Britain's Vodafone, said it would wait to hear the Tribunal's reasons before considering all its options, which it added could include an appeal in the Competition Appeal Court.
"I am deeply surprised and disappointed by the Tribunal's decision," said Shameel Joosub, CEO of Vodacom Group. "South Africa desperately needs additional significant investment, especially in digital infrastructure in lower income areas."
Maziv and Remgro, which has a 57% stake in Community Investment Ventures Holdings, the parent company of Maziv, also said they were considering all the alternatives at their disposal.
The blocking of the merger has prompted a flurry of criticism of the competition authorities.
“Ideally, what the decision should now trigger is a full review of the powers of the competition regulators, whose overreach in this case threatens economic growth and the roll-out of services to the poor,”
notes Tech Central.
According to Tech Central, millions of South Africans could now be deprived of getting an internet service at home for years longer “due to bureaucrats who clearly have a view that Vodacom is already too dominant in telecommunications.”
Also criticized are the protracted timeframes for reviewing the deal..
"That it took the competition authorities three years to conclude their investigations into the proposed transaction is wholly unacceptable, too. How can any company hope to make strategic deals if the regulator takes 36 months to approve them? There should be a strict time limit on how long these investigations are allowed to take – perhaps no more than six months. In three years, the industry has changed considerably, too."
Vodacom announced in 2021 that it would pay 6 billion rand ($339 million) in cash and in certain fibre assets valued at 4.2 billion rand for a 30% stake in Maziv, the recently formed fibre holding company of Dark Fibre Africa and Vumatel.
But last year the Competition Commission recommended to the Tribunal that the proposed merger be prohibited on the grounds that it is likely to substantially prevent or lessen competition in several markets. Specifically, the Commission argued that the merger would in addition cause irreparable structural damage to the broadband market.
The Commission said the conditions offered by the merger parties did not fully address the resultant harm to competition.
On Tuesday the Commission welcomed the decision.
Maziv had committed to capital expenditure of at least 10 billion rand over a five year period, including rolling out fibre infrastructure past at least one million new homes in lower income areas over a five-year period.
The parties had also committed to creating up to 10,000 new jobs and establishing a 300 million rand enterprise and supplier development fund.
The Tribunal's decision follows an extensive hearing that took place over 26 days, where the merger parties, the Commission, government and rivals of Vodacom and Maziv argued for or against the deal.
Source: Reuters, Tech Central
