By Lerato Mpembe
Trade, Industry and Competition Minister, Parks Tau, has acknowledged the recent order by the Competition Tribunal, which formally prohibits the proposed acquisition of a 30% stake in Maziv by Vodacom. This ruling aligns with the Competition Commission’s recommendation to prevent the merger, emphasizing concerns that the consolidation could undermine competition in the rapidly expanding 5G Fixed Wireless Access (FWA) and fibre infrastructure markets. Maziv, which consolidates major fibre players like Vumatel and Dark Fibre Africa (DFA), is a significant player, and merging with Vodacom, the country’s largest mobile network operator, would potentially create a dominant force in South Africa’s digital landscape.
In a public statement, Minister Tau’s department, the Department of Trade, Industry and Competition (dtic), noted that while Vodacom and Maziv had proposed various public interest commitments, such as enhanced fibre rollout and investment in underserved communities, these measures were deemed insufficient by competition regulators. The dtic highlighted that Minister Tau intends to review the full rationale behind the Tribunal’s decision to determine further action in line with South Africa’s Competition Act.
The Competition Tribunal’s order, issued on 29 October 2024, reflects the Commission’s findings from an in-depth investigation initiated when Vodacom first announced its intent to merge with Maziv. The Commission’s investigation found that Vodacom and Maziv, even without a merger, already had comprehensive expansion plans for low-income areas, especially underserved communities in rural and peri-urban regions. However, combining these resources could decrease competitive pressures and reduce the benefits typically enjoyed by consumers due to rivalry between firms, such as price reduction and enhanced service quality.
Key Points of Concern
The Commission’s detailed analysis highlights several competitive concerns with the merger. Key findings include:
1. Reduced Price Competition in Fibre and FWA MarketsEvidence shows that in areas where multiple fibre network operators compete, prices tend to be more consumer-friendly. The proposed merger threatened to eliminate this price competition by consolidating control over fibre networks in Vodacom’s hands. This would not only affect pricing but also decrease consumer choice in these critical connectivity markets.
2. Implications for Low-Income Consumers
Both Vodacom and Maziv had separate, pre-existing plans to expand network coverage in underserved regions. However, the merger was seen as potentially stifling this competition, which is essential for keeping prices low and enhancing service availability for low-income households. The Commission found that combining Vodacom’s mobile reach with Maziv’s fibre infrastructure might create a scenario where underserved communities would lose out on affordable connectivity options that are currently encouraged through competition.
3. Potential for Self-Preferencing and Discrimination
The merger raised concerns about Vodacom’s increased incentive to favor its own retail businesses over competitors in providing fibre and network services. This “self-preferencing” could lead to discriminatory pricing, where rival mobile network operators (MNOs) or other internet service providers (ISPs) would face reduced access to essential infrastructure or higher operational costs, ultimately impacting their ability to compete.
4. Limited Public Interest Gains
While Vodacom and Maziv proposed several remedies to justify the merger—including investments in local infrastructure, job creation, and prioritizing small and medium enterprises—most of these initiatives were found to be part of existing obligations or plans that would likely proceed regardless of the merger. Consequently, these public interest benefits were not considered sufficiently “merger-specific” to outweigh the competition concerns highlighted.
Vodacom’s Response and Next Steps
Despite the decision, Vodacom and its parent group, Community Investment Ventures Holdings (CIVH), remain firm in their belief that the merger could provide significant benefits for South Africa’s economy. Vodacom had planned an investment exceeding R10 billion over five years to develop fibre infrastructure in underserved regions, alongside a commitment to create up to 10,000 jobs. In response to the prohibition, Vodacom expressed disappointment, emphasizing that the merger was positioned to bridge the digital divide in South Africa, ensuring widespread access to affordable, high-speed connectivity.
Vodacom plans to assess options for further action, which may include appealing the Tribunal’s decision. The Competition Appeal Court stands as the next possible venue, where the case could be reviewed for reconsideration. However, legal experts indicate that the Tribunal’s detailed rationale could present a challenge for any appeal, as the decision underscores a robust defense of consumer choice and market competition.
Industry and Public Reactions
The telecommunications sector and various consumer advocacy groups have reacted to the Tribunal’s decision with mixed sentiments. On one side, small fibre operators and independent ISPs welcomed the decision, suggesting that it preserves a competitive environment and helps prevent market monopolies that could limit innovation and increase costs for end-users. For them, the decision supports a market structure where multiple players can provide diverse services, encouraging competitive pricing and better options for consumers across income levels.
On the other hand, some industry players argue that larger investments, such as those proposed by Vodacom, are necessary to address South Africa’s digital infrastructure gaps, particularly in rural and lower-income urban areas. They argue that a consolidated fibre entity with Vodacom’s backing could scale infrastructure projects faster, making it easier to meet national broadband goals. Despite these views, the Tribunal’s decision indicates a preference for preserving existing market competition over expedited infrastructure development through mergers.
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