Source: Government of South Africa
Trade, Industry and Competition Minister Parks Tau has welcomed the agreement reached between the merging parties and the Competition Commission in the Vodacom-Maziv merger deal.
“The substantial public interest commitments made by the merging parties will significantly improve access to affordable internet for underserved communities, thus enabling easier participation in economic activity, particularly for young people,” the Department of Trade, Industry and Competition (dtic) said on Wednesday.
In October last year, the Minister noted the order issued by the Competition Tribunal prohibiting the proposed merger between Vodacom (Pty) Ltd and Maziv (Business Venture Investments No. 2213 (Pty) Ltd).
The order followed the Competition Commission’s initial recommendation to prohibit the merger, citing significant concerns that it could substantially reduce competition in critical markets, particularly within the 5G Fixed Wireless Access (FWA) and fibre infrastructure sectors.
READ | Minister notes Competition Tribunal’s decision on Vodacom, Maziv merger
In a statement on Tuesday, the Competition Commission said it had reached an agreement with the parties on revised conditions that substantially remedy the competition concerns raised by the Commission in its recommendation to the Tribunal that the Vodacom/Maziv merger be prohibited.
This agreement follows constructive engagements between the Commission and the merger parties to remedy the deficiencies in the previous conditions identified by the Tribunal in its prohibition of the merger.
There were three primary competition concerns that were not adequately addressed by the proposed conditions at the time of concluding the Tribunal hearings.
The first of these was the horizontal reduction in competition between Fixed Wireless Access (FWA) and Fibre to the Home (FTTH).
According to the Commission, the revised conditions address these shortcomings by improving the capex commitment by Maziv and extending it to a five-year period post-merger to ensure that Maziv remains incentivised to service third party network operators.
The second issue was the horizontal overlap in FTTH infrastructure and potential price increases post-merger.
“The previous conditions were inadequate insofar as they included a ‘weak’ divestiture condition that did not adequately incentivise the merging parties to divest the overlapping infrastructure. The revised conditions put in place a standard divestiture arrangement whereby the failure to sell the assets within a particular period result in a trustee divestiture process to ensure the assets are divested and pre-merger competition is restored,” said the Commission.
It further added that the condition follows the standard formulation used in other merger transactions and requires that a transparent and competitive process be followed to identify a proposed purchaser.
The third issue was over vertical foreclosure concerns with the commission stating that although there were fairly comprehensive conditions in place to address foreclosure, there were notable challenges with monitoring and enforcing the conditions with the resulting concern that action would not be sufficiently timely to prevent foreclosure from occurring and harming competition.
“The revised conditions introduce some structural changes to Maziv’s governance structure that limit the merged entity’s incentives to foreclose competitors. The conditions now also incorporate an enhanced fast-track interim relief process that will address potential foreclosure concerns while the lengthier formal process to investigate any alleged foreclosure is underway. This ensures that any attempt to get a first-mover advantage that will have an enduring effect in the market can be prevented through fast-track interim relief,” it said.
Public interest
The Commission added that there are significant improvements to the public interest commitments which increase the substantiality of these commitments.
These include additional capex spend to roll-out new (Fibre-to-theBusiness (FTTB), FTTH and Fibre-to-the-Site (FTTS) infrastructure, free access to 1Gigabit per second fibre lines for public libraries and clinics passed by FTTH infrastructure, an increase in the number of police stations that Vodacom will provide with FWA products, an additional commitment to enterprise development and an increase in the employee share ownership plan previously agreed.
“Access to reliable, high-speed internet is the cornerstone of a dynamic economy and a democratic society. The Commission is confident that the revised conditions agreed with the merger parties will ensure that South Africa will benefit from the continued competitive prices and product choices in this critical sector,” Commissioner Doris Tshepe said.
This as Minister Tau further welcomed the investment committed by parties.
“This commitment will ensure that South Africa participates meaningfully in the global economy through new sectors like Generative Artificial Intelligence, the Internet of Things and other ICT related sectors which will propel the world into the future.
“The matter will proceed, unopposed, at the Competition Appeal Court where the agreement will be placed before the Court for its final consideration. The Minister thanks all parties involved for their constructive engagement throughout this process,” said the dtic.
The Commission as one of the the three independent statutory bodies established in terms of the Competition Act to regulate competition between firms in the market, it is the investigating and prosecuting agency in the competition regime while the Tribunal is the court. – SAnews.gov.za