Vodacom shares tumble on competition probe - TechCentral

Vodacom shares tumble on competition probe

Vodacom Group slumped the most in more than seven years after South Africa’s antitrust regulator started a probe into a contract with the national treasury that may constitute an abuse of market dominance.

The September 2016 deal to provide mobile phone services to the finance ministry prevents other operators from selling to state departments, the Competition Commission said in an e-mailed statement on Wednesday.

The Vodacom contract has since been adopted by other parts of the government and some state-owned entities and municipalities will be incentivised to use it, the regulator said.

Vodacom shares plunged as much as 8.5%, the most since May 2010, and traded 5.2% lower at R148.32 as of 3.57pm in Johannesburg. Vodafone Group, the owner of a majority 65% stake, pared gains to trade 0.1% higher.

Vodacom is South Africa’s market leader. The treasury deal, which runs until 2020, is worth about R5bn, people familiar with the matter said at the time the contract was awarded.

Wireless operators across sub-Saharan Africa have become the subject of government and regulatory scrutiny in recent years for dominant market positions, including Kenya’s Safaricom, in which Vodacom owns a 35% stake. MTN Group, number two to Vodacom in South Africa, has had services suspended in Nigeria, where it leads the market.

A spokesman for Vodacom didn’t immediately comment.

“The commission has reasonable grounds to suspect that the exclusive contract may constitute an exclusionary abuse of dominance by Vodacom in contravention of the Competition Act,” the regulator said.  — Reported by Loni Prinsloo and John Bowker, (c) 2017 Bloomberg LP

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