Competition Tribunal approves Vumatel acquisition – with conditions

The Competition Tribunal has approved the proposed merger between Community Investment Ventures Holdings (CIVH) and Vumatel – subject to conditions.

This means CIVH, which acquired its initial shares in Vumatel in June 2018, will have sole control of Vumatel.

Vumatel is a last mile fibre access provider. It provides underground fibre broadband infrastructure in residential areas and homes.

It also provides fibre to the home services to internet service providers (retailers) which, in turn, offer internet deals to the public.

Concerns 

Concerns were originally raised about the merger as CIVH controls Dark Fibre Africa (DFA), a fibre optic company which provides backhaul services to Vumatel.

DFA builds and operates optic fibre infrastructure which is leased to wholesale customers such as Vumatel and its competitors in the last mile.

DFA also controls SA Digital Villages (SADV), a fibre to the home provider and internet service provider specialising in the installation, operation and maintenance of fibre optic networks in residential areas and homes, on which it also provides customers with services.

CIVH is jointly controlled by Industrial Electronic Investment (IEI). IEI is controlled by Venfin, which is, in turn, controlled by Remgro Ltd (Remgro).

The Competition Commission said that it had vertical competition concerns in the proposed transaction because DFA is considered to be the largest backhaul provider – assessed on a regional basis.

The Commission also raised horizontal competition concerns as it had found that Remgro indirectly controls Octotel, a Cape Town based competitor to Vumatel.

Octotel

Octotel, which also relies on DFA to provide it with backhaul services in the Western Cape, had raised concerns in relation to the proposed merger and was permitted to make submissions to the Tribunal as an ‘intervenor’.

Octotel urged the Tribunal to prohibit the merger, arguing that the proposed conditions were insufficient to prevent CIVH, via DFA, favouring Vumatel at the expense of rivals.

Conditions of merger

The Tribunal approved the transaction subject to conditions which require that the merged entity retains an open access service provision model for certain of its services post-merger, as well as increased transparency mechanisms and an obligation not to discriminate against its customers who compete with Vumatel.

The conditions also include two public interest obligations, one of which is confidential due to business sensitivity.

The other provides for the merging parties to provide free uncapped fibre services to public and private schools that its networks bypass.


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Competition Tribunal approves Vumatel acquisition – with conditions