The Competition Tribunal’s decision to block the proposed acquisition by Vodacom of an up-to-a-40% co-controlling stake in fibre operator Maziv was in part influenced by the competition regulator being unconvinced of the mobile operator’s claims that it would not influence Maziv’s strategic and operational direction post-merger.
At the tribunal’s marathon hearings into the matter, Vodacom presented the deal as a strategic financial investment – valued at R14-billion – that would unshackle Maziv from its large debt burden and allow for further infrastructure investment in fibre, including in underserviced areas.
This implied the merged entity would not behave in ways that would give either party an unfair competitive advantage in any of the markets they operate in – by, for example, sharing sensitive information or influencing key strategic decisions in Vodacom’s favour.
The tribunal, however, interpreted the merger in a different way, emphasising that the investment by Vodacom “should not be viewed as a once-off event” as it “aligns the merger parties’ future interests”, meaning its effects on competition were likely to be more severe.
“The merger parties’ witnesses’ version rings hollow that post-merger, Vodacom would have no influence over the operations of Dark Fibre Africa and Vumatel,” the tribunal said in its reasons document. Vumatel and DFA are subsidiaries of Maziv.
“The evidence shows that Vodacom will have extensive decision-making rights and powers at shareholder, director and even committee levels in relation to Maziv as well as its subsidiaries…”
According to the reasons document, the tribunal’s concerns “stem from the fact that Vodacom is not a passive shareholder in Maziv” and would have “extensive rights” allowing it to influence key decisions that would “lead to anticompetitive and anti-innovation” outcomes over time.
Veto power
Despite having a minority shareholding, Vodacom would have board representation and voting rights equal to Maziv parent CIVH, which is controlled by JSE-listed Remgro. The tribunal cited Vodacom’s ability at shareholder level to veto the appointment or dismissal of Maziv’s CEO and chief financial officer, the issuing of shares, the financing of debt, and the adoption or amendment of Maziv’s dividend policy as key concerns.
Another worry for the regulator was Vodacom’s status as the largest customer of DFA’s. Post-merger, Maziv would have had incentive to behave in ways supportive of Vodacom’s growth as that would, in turn, lead to growth at DFA. Furthermore, “Maziv would have a real incentive to appease its largest customer” by adhering to Vodacom’s requirements at board level.
Read: Finally! Tribunal unpacks why it blocked Vodacom’s Vumatel deal
“The more aggressively Vodacom competes with Maziv, the lower Maziv’s revenues and the lower the return on Vodacom’s interest in Maziv. As a result, Vodacom would be incentivised, where possible, not to compete, or to compete less aggressively, with Maziv,” said the reasons document.
Vodacom argued in the hearings that that Maziv, by acting in ways that benefitted Vodacom, could be acting counterproductively to its own interests. Maziv’s board and shareholders could not be made to behave in ways contrary to their own interests as they would naturally seek to protect their own investment, the mobile operator said.
The tribunal’s first counter to this line of reasoning was that the interests of Vodacom and Maziv would align post-merger.
The second counter argument related to Vodacom’s stated plan to increase its fibre holdings in its various markets across Africa, including Tanzania, the Democratic Republic of Congo and Mozambique, through strategic joint ventures that involved Maziv.
The tribunal reasoned that Maziv shareholders could be swayed into making decisions that favoured Vodacom in South Africa on the assumption that whatever “hit” the company would take in the local market would be made up for by deals outside of South Africa.
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“Vodacom would have the ability, as co-controlling shareholder with a significant shareholding, to influence CIVH to vote with it on issues in Vodacom’s or CIVH’s broader interests because of their joint commercial and economic incentives,” the tribunal said. – © 2025 NewsCentral Media
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