MTN says proposed conditions for Vodacom-Maziv merger are insufficient

MTN has raised concerns over the proposed merger between Vodacom and Remgro-controlled Community Investment Ventures Holdings and Maziv, arguing that it would grant Vodacom control over critical fibre infrastructure and potentially harm competitors.

During its opening statement at the tribunal, MTN acknowledged the potential benefits of the merger, including investment in the country’s fibre infrastructure and industry consolidation.

However, Africa’s largest telecom group insisted that the merger required scrutiny to prevent anticompetitive practices.

One of MTN’s primary concerns is the influence Vodacom would wield over Dark Fibre Africa (DFA) and Vumatel after the merger. Despite claims from the merger parties that Vodacom would act as a passive investor, MTN believes that Vodacom’s investment would ensure it could influence key decisions.

Through this merger, Vodacom is set to retain its mobile network operator business, long-haul fibre assets, and retail ISP business. The company would transfer its metro and last-mile fibre assets and wholesale operations to DFA and Vumatel, valued at about R4.2bn, in exchange for shares in Maziv.

Vodacom will subscribe for Maziv shares for cash between R10bn and R14bn, resulting in a30%-40% stake in the company.

MTN said this would give Vodacom joint control of Maziv, with equal board representation and influence over strategic decisions.

“We pause to dispel a point that is divorced from the reality of corporate life. The merger parties’ witnesses suggest to this tribunal that, post-merger, Vodacom would have no influence over the operations of DFA and Vumatel; that it is a kind of benevolent investor seeking to release a promising business from the strictures of its debt burden. MTN is unconvinced,” MTN said.

“A corporate colossus of Vodacom’s standing would not entrust the arteries of its lifeblood to, or invest up to R14bn in, targets at liberty to act as they see fit, including by granting all-comers open access to Vodacom’s metro and last-mile fibre assets, in the hope that the targets would do a decent job with these resources.

“In the real world, in every matter of strategic significance, Vodacom would materially influence the decision of Maziv, which would materially influence the related decision of DFA or Vumatel.”

Dark fibre (passive fibre) and lit fibre (active fibre) are not in the same market and do not compete directly, according to MTN. The company argued that DFA’s dominance in the dark fibre market is not balanced by Openserve’s prominence in the lit fibre market.

MTN also argued that fixed wireless access and fibre to the home (FTTH) offer little competitive engagement, especially where FTTH is available. The merger could thus enhance the merged entity’s market power, particularly in underserved areas, it said.

Harm to competition 

MTN believes the potential integration and strategic alignment across the mobile and fibre network infrastructure could lead to practices that harm competition. These practices might include increased prices for rivals, delayed or degraded quality of services and prioritising Vodacom’s interests over other fibre network operators (FNOs) and internet service providers.

MTN said the proposed conditions for the merger were insufficient, and the company called for measures to ensure open access and fair competition. It criticised the proposed remedies by the merger parties as being “behavioural” rather than “structural”, making them difficult to monitor and enforce.

The company argued that a monitoring trustee, as proposed, would require independence, expertise, and capacity to detect and address subtle instances of preferential treatment or prejudice.

The Competition Commission previously rejected the merger, arguing that it would create a dominant entity, reducing competition in both home broadband and mobile data markets. The commission also emphasised the potential negative impact on public interest, arguing that the merger would fail to deliver benefits or efficiencies that outweigh the competition harm.

However, during the hearing on Monday Vodacom defended the merger, citing its commitment to expanding fibre connectivity. According to Vodacom, Maziv’s expertise in deploying fibre infrastructure would enable more effective and widespread connectivity. Vodacom highlighted that the merger would result in shared tenancy, reducing costs for Vodacom and consumers.

The company also argued that the merger would allow for better use of Vodacom’s existing assets and facilitate the expansion of 5G technology.

Correction: July 16 2024
A previous version of this article incorrectly said MTN was opposed to the Vodacom-Maziv. We regret the error 

goban@businesslive.co.za