Nicola Mawson

The Competition Tribunal today prohibited a proposed multi-billion rand merger between Vodacom, Dark Fibre Africa (DFA) and Vumatel to create what would have been South Africa’s largest fibre operator.

In its decision, the Tribunal said its reasons for the decision would be issued at a later stage.

Vodacom sought to buy DFA and Vumatel from Remgro through a combination of R6 billion cash and the contribution of some transmission access fibre network infrastructure at a valuation of R4.2bn, which would effectively create Maziv, set to be the largest fibre infrastructure player in South Africa.

Maziv, which is what the proposed fibre operator will be called, will be partially owned by Vodacom, while theSouth Africa's largest mobile operator will simultaneously hold on to its mobile business, long-haul fibre assets, and retail ISP business.

Concerns were raised that Vodacom will have main control over the merged company, even though it will only own between 30% and 40%, because it will be providing funding for investment.

The Tribunal’s decision to prohibit the proposed merger follows an extensive hearing that took place over 26 days between May 20 to September 27. The parties also made further written submissions after this, the last of which was received by the Tribunal on October 16.

During the hearing, the Tribunal heard evidence from various factual witnesses including from each of the merging parties, Frogfoot Networks, Telkom Consumer and Small Business and Mobile Networks of Telkom Consumer and Small Business, divisions of Telkom, MTN and Rain. At the Tribunal’s request, Hero Telecoms also provided factual testimony.

The Competition Commission had opposed the merger on the basis that it would create a monopoly that could control pricing, and it would also see poor people lose out on cost-effective broadband connectivity.

Towards the end of last month, in closing arguments on behalf of the Commission in Competition Tribunal hearings, Advocate Daniel Berger, SC, said the merger would be to the detriment of poor people, particularly impeding the Constitutional right to education.

Jerome Wilson, SC, acting on behalf of the merging entities, however argued in his closing that the merger would have the opposite effect. “This merger matters for the economy and for South Africans. The merger comes at a critical time as the delay in the roll out of fibre at scale to low-income communities is entrenching economic disadvantage.”

In March, the Internet Service Providers’ Association of South Africa issued a research report that found that many South African consumers have no choice of fibre service provider. Of those who have at least one fibre network operator providing service, more than a third have no choice of who to use.

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