It’s heartening to see the department of trade, industry & competition (DTIC) — now under the guidance of minister Parks Tau — appealing the Competition Tribunal’s rejection of the merger of the fibre operations of Vodacom and Remgro. But the proposed deal has been an unnecessary test of endurance for not only the two companies but also for millions of South Africans who could benefit hugely from affordable internet.
Time is money, and the competition authorities need a serious wake-up call for the sake of the still vulnerable economy. Vodacom and Remgro first submitted their proposals for creating a new and enlarged fibreoptic hub under the Maziv brand to the Competition Commission and telecommunications regulator Icasa back in December 2021. It was only in August 2023 that the commission made its recommendation to the Competition Tribunal that the proposed transaction be blocked.
Vodacom and particularly Remgro have borne the cost of this arduous process. In fact, the delay in clinching the deal eventually forced Remgro’s subsidiary, Community Investment Ventures Holdings, to drastically curtail the rollout of fibre to households — especially via its Vumatel operation — because without the injection of fresh capital from Vodacom it would not be prudent to gear up to levels that might ultimately prove punitive.
This is all a bit of tragedy for lower-income households. In the year to end-March, Vumatel had already made great strides in its so-called Core market (households earning more than R30,000 a month), with 906,000 households passed and an impressive 43% uptake from subscribers. In the Reach market — households earning between R5,000 and R30,000 a month — Vumatel has passed more than 1-million households with a 31% uptake from subscribers.
Success in this segment would go a long way towards democratising the internet
But Vumatel was just getting going on the lower-income households (earning R5,000 and less), where its Key offering had passed only about 21,000 households and signed up just 2,000 or so subscribers. The uptake was 9.2% — but the big picture here is that Vumatel believes the potential for the Key market is almost 10-million households countrywide. Success in this segment would go a long way towards democratising the internet in South Africa — empowering lower-income households in terms of small business initiatives, education and even entertainment.
It’s fairly pointless to rage against the competition authorities without being able to see why the tribunal prohibited the merger. The fact that the contentious ruling is not readily available to the parties involved might in itself be worrying. Still, the reasons will be intriguing to gauge — remembering that the DTIC as well as rivals MTN and Rain told the tribunal they all supported the transaction.
If the competition authorities have their prohibitive way, bang go the commitments to invest at least R10bn over a five-year period and to pass at least another 1-million homes in lower-income areas over a five-year period. Then there is the commitment to create up to 10,000 new jobs and a promise to provide high-speed internet to adjacent schools.
Tau clearly sees the sizeable benefits of the merger. How the competition authorities have seen the proposed merger as bad for the well-contested fibre space and not being in the interest of the public at large is anyone’s guess.
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