Nicola Mawson
Should Vodacom be allowed to merge with Vumatel, and Dark Fibre Africa (DFA), this would limit competition in the fibre space and result in the creation of a monopoly.
This is according to Advocate Daniel Berger, SC, who is delivering his closing statement on behalf of the Competition Commission at the Competition Tribunal regarding the merger to create the largest fibre infrastructure player in South Africa yesterday.
Maziv, which is what the proposed fibre operator will be called, will be partially owned by Vodacom, while the South Africa’s largest mobile operator will simultaneously hold on to its mobile business, long-haul fibre assets, and retail ISP business.
Berger said, instead of the merger being approved, Vodacom should wait for three to five years when more spectrum will become available. At the same time, he said the mobile operator could increase its debt to roll out additional points of connection.
“You can always revisit prohibition, you can't revisit allowing the merger,” he said. “It's a move to a monopoly.”
Berger said that, should the deal not be approved, all interested market participants will be competing for lower income areas. “They will be trying to find ways of getting into those areas,” he said.
The Commission is opposed to the deal on the basis that it will reduce competition and result in increased connectivity prices.
Berger noted that the parties, especially Vodacom, will find another way of expanding their networks should the deal not go ahead. He pointed to Vodacom board minutes in which it was stated that, should the merger not be agreed among the parties by the end of March 2021, the cellular operator would seek an alternative means of growing its fixed broadband network.
Vodacom aims 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.
South Africa’s largest mobile network operator’s argument that its mobile revenue is declining applies equally to MTN, Berger said.
The advocate also argued that, should the merger go ahead, MTN will likewise not have any choice other than to consolidate with another fibre provider, which will place the Tribunal in a difficult position should it grant permission for Maziv to be formed.
“The Tribunal can't close its eyes to the probability of that technique,” Berger said.
Moreover, DFA will lose out on the possibility of expanding into other African markets, Berger added.
Concerns have also been 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.
Berger said that the proposed conditions in terms of ensuring that prices are not artificially inflated, and that Vodacom does not have undue influence over Maziv cannot be monitored and enforced. “This further increases the risk that the proposed conditions will not be effective,” he said.
In addition, the merger would be to the detriment of poor people, particularly impeding the Constitutional right to education, said Berger.
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.
“Comparing coverage against household income reveals that there has been a clear focus on covering the highest earning quintile of households, while both coverage and competition for lower income households lags behind,” it said.
Closing arguments continue tomorrow.
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