Home Opinion and Features Vodacom denies it will manipulate market with fibre merger

Vodacom denies it will manipulate market with fibre merger

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Vodacom says it has no intention of raising prices for fibre connection or cutting out other telecoms companies should its proposed deal with Dark Fibre Africa and Vumatel, to create the country’s largest fibre network, be approved.

Vodacom Group CEO Mohamed Shameel Joosub. File picture: Nhlanhla Phillips, Independent Newspapers

By Nicola Mawson

VODACOM says it has no intention of raising prices for fibre connection or cutting out other telecoms companies should its proposed deal with Dark Fibre Africa and Vumatel, to create the country’s largest fibre network, be approved.

The three companies aim to establish a company, called Maziv, in a multibillion-rand deal, with Vodacom holding a 30 to 40% stake in return for a R6 billion investment.

The Competition Commission has opposed the tie-up, arguing it was anti-competitive as Vodacom would have a material interest in the company, allowing it to increase prices and refuse other operators access to the network.

Addressing the Competition Tribunal on Friday, Vodacom Group CEO Shameel Joosub said Vodacom had no interest in increasing access costs nor limiting competition, as well as slowing down the roll-out of its mobile network, as has been alleged.

Joosub said Vodacom, which had an 8% market share in the fibre sector, would not benefit if it used its shareholding in the new company to manipulate prices.

“The price has to be in the context of competition. You can’t just willy-nilly put prices up,” he said.

In addition, customers would leave if the cost to connect was increased, which would inadvertently increase Vodacom’s costs, said Joosub.

“It’s a little bit of a red herring.”

Joosub said Vodacom had no interest in using its voting power to limit access to the fibre pipeline because that would destroy shareholder value.

“Why would a 70% shareholder want to destroy its business to make a 30% shareholder happy? That makes no sense.”

There was, Joosub said, a massive opportunity to connect more homes to fibre as only two million households had access.

“There’s still a huge opportunity to grow the level of fibre in South Africa.”

He said that without the deal, Vodacom would have to spend billions of rand more in capex to play catch-up in the fibre sector.

The JSE-listed telecoms group invested about R11bn in South Africa last year.

Joosub told the tribunal that one of the conditions of being allowed to partner with Vumatel and Dark Fiber Africa was that it would invest R60bn in infrastructure over a period, and not fall behind the competition by more than 20% in one area.

He said that if the proposed merger did not go through, the likelihood of building a pipe was slim and the company would continue to invest in its mobile network as it had been doing.

Peter Takaendesa, the head of equities at Mergence Investment Managers, said: “The reality is that Vodacom and MTN realise that they are late to the fibre roll-out market and, hence, looking to merge or partner with existing operators instead of trying to aggressively roll out their own fibre networks.”

Takaendesa said that if the deal did not go through, Vodacom would probably invest in growing its other markets outside South Africa.

He said a key issue that the Competition Commission had not considered was that the merger would result in investment into South Africa.

“The reality is that most telecoms markets will, ultimately, come down to a few operators that can sustain themselves over the long-term, given the capex intensity nature of the industry and declining returns as markets mature.”

While the commission’s concerns in terms of competition were genuine, Takaendesa said, Mergence believed that the competition authorities should focus on finding remedies rather than prohibiting the transaction.

– BUSINESS REPORT

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