South Africa’s Watchdog Recommends Blocking Vodacom’s Acquisition of Maziv

The mammoth deal, which was valued at 13.2 billion rand ($696 million) was initially submitted to the Competition Commission for approval. Despite industry expectation, the merger would be approved, the Commission ultimately decided to recommend against it.

The Competition Commission cited several competition concerns. Firstly, its investigation found that 5G fixed-wireless (FWA) services and fibre compete in the same market and consumers “stand to benefit from increasing competitive rivalry between FWA and fibre”.

The Commission also pointed out that the proposed merger will result in the loss of direct competition between Vodacom and Maziv in the areas where both [companies] have deployed fibre. Maziv’s fibre assets include Vumatel, Dark Fibre Africa (DFA), and their various holdings in companies like Herotel and SADV.

The merger is also likely to stifle long-term potential competition in fibre and 5G FWA. Both Maziv and Vodacom had significant pre-merger infrastructure plans to expand coverage, particularly in underserved low-income areas. South Africa’s Competition Commission asserted that this “will likely prevent or lessen this competitive rivalry and deprive low-income consumers of the benefits that fixed competition exerts on mobile products as currently enjoyed by wealthier and urban consumers in South Africa”.

Read more: South Africa: Competition watchdog probes Vodacom for market abuse

The regulator’s investigation also revealed “several concerns about incentives for self-preferencing and foreclosure of competitors post-merger”. This means that post-merger, Vodacom’s ability to engage in preferential practices and disadvantage rival mobile network operators (MNOs) is increased. Vodacom has the option to acquire an additional 10% stake in Maziv to increase its shareholding to 40%, which could further enable an abuse of their dominant market position.

These severe competition concerns outweigh the seemingly modest benefits of the merger, as “the public interest commitments provided by the merging parties do not outweigh the competition concerns”, according to the Commission. Almost all of the supposed benefits of Maziv’s open-access regime have not been universally accepted – instead, evidence and allegations of self-preferencing behaviour and discriminatory pricing have arisen.

This groundbreaking decision by the Competition Commission to block the deal will send shockwaves through the local telecoms industry, which had expected a wave of consolidation on the back of it. It also throws a big spanner in the works for Remgro, the largest shareholder in Maziv shareholder CIVH, which had seen the Vodacom transaction as a way of dealing with the company’s debt.

The Competition Commission has argued that the merger of Vodacom and Maziv is “likely to substantially prevent or lessen competition in several markets and that the conditions offered do not fully address the resultant harm to competition.” The Commission recommended against the transaction, leaving the Competition Tribunal to make the ultimate decision. Such deals usually take between 12 and 18 to conclude; however, this particular merger has been on the Competition Commission’s desk for 20 months, and it remains to be seen whether the Commission’s recommendation will be accepted.

Source: Bloomberg