The Competition Commission has okayed the acquisition by New York-listed IHS Towers of thousands of telecommunications towers owned by MTN South Africa, but has attached stringent conditions to the deal.

The commission said late on Wednesday that the sale of 5 713 “passive tower infrastructure sites” by MTN could go ahead. However, it said the transaction raises various competition and “public interest” concerns.

It said it has concerns about the possible exclusion of rival independent tower operators and vendors from the market, as well as the potential exclusion of rivals from access to space on the affected towers.

“The commission was particularly concerned about the ability of SMME (small, medium and micro enterprises) and HDP (historically disadvantage person) tower vendors and independent tower operators to effectively participate in and expand in the tower infrastructure market, particularly at a time when mobile operators are considering the technical and other imperatives of rolling out 5G technology,” it said in a statement.

The commission has imposed several conditions:

MTN may not retrench any of its employees in South Africa as a result of the merger for a period of 24 months from the implementation date.
Within 18 months, IHS South Africa must achieve a minimum black economic empowerment status of level 4 or better. This must reach level 1 within four years. Also, within 24 months, the company must have 30% black ownership.
MTN must spend R60-million/year for 10 years to support SME and HDP-owned vendors in the telecommunications sector. This amount will expand by the consumer inflation rate in each year for 10 years.

“Further particulars of the [black economic empowerment] conditions are subject to a confidentiality claim made by the merging parties. The merging parties’ confidentiality claim will be adjudicated by the Competition Tribunal,” the commission said, without elaborating on the reason for the confidentiality.

IHS South Africa and MTN must also procure a substantial proportion of the goods and services required for the construction of its tower sites as well as the management, maintenance and security of tower sites from small businesses and black tower vendors in South Africa. This condition is in place for a period of 10 years. The vendors chosen must also be given preferential payment terms to support their “working capital requirements”.

In addition, the regulator said there is a structural link between MTN South Africa and IHS South Africa, which “raises a concern” that IHS may be the preferred partner for new site roll-outs.

Further particulars of the [black economic empowerment] conditions are subject to a confidentiality claim made by the merging parties

“To limit any exclusionary effect associated with such a strategy, the commission has imposed a condition limiting preferential allocation of MTN’s new site roll-out in terms of both the number of sites and the period in which IHS South Africa may be given first preference for new site roll-outs.”

Then, for the towers it’s buying from MTN, IHS must make the sites available to all existing users on the same terms and conditions as are currently applicable.

“On the expiry of those agreements, in relation to both the tower sites being acquired and any new sites constructed by the IHS Towers, IHS will, on request, provide services (including, but not limited to, lease space on towers) to any party licensed in terms of the Electronic Communications Act (including existing users) on fair, reasonable and non-discriminatory terms, provided that it is technically, commercially and legally feasible to do so, and subject to performance by the third parties of their respective obligations under the applicable commercial agreements.”