Vodacom cautious over Neotel deal approval

Vodacom is one step closer to a Neotel tie-up. (Duncan Alfreds, Fin24)
Vodacom is one step closer to a Neotel tie-up. (Duncan Alfreds, Fin24)

Cape Town - Vodacom has expressed cautious welcome over one regulator's approval of its planned bid to buy Neotel.

The Independent Communications Authority of South Africa (Icasa) earlier this week gave Vodacom the green light to buy Neotel for R7bn.

But the regulator's word may not be the final say on the matter as the Competition Commission is responding to requests from competitors that the Neotel tie-up may not be in the public interest.

"We are pleased to receive approval for the transaction.  We will work with Icasa to finalise the conditions of the approval," Vodacom spokesperson Richard Boorman told Fin24.

Vodacom CEO Shameel Joosub has previously suggested that the scrutiny of the deal as a result of competitor pressure was not appropriate.

"The deal will not distort competition. Icasa is here to protect consumers - not to protect competitors from competition," he said at an Icasa hearing into the deal recently.

In SA, Vodacom has around 10 000 base stations and senior rival MTN about 6 000. Despite that, both companies are actively looking to push higher speed long term evolution (LTE) networks by re-farming existing spectrum.

Both MTN and Cell C object to the deal on the basis that it would lock down the South African market for Vodacom at the expense of competition and ultimately harm consumers by driving prices up.

Vodacom plans to use Neotel's fibre network to deliver fibre to the home. (Duncan Alfreds, Fin24)

The tie-up with Neotel is expected to cost around R7bn and will move Vodacom's plans for fibre to the home forward.

"We are encouraged that the acquisition is moving and brings us closer to providing fixed connectivity to homes and businesses," Boorman said.

On the Competition Commission website, data reveals that the Vodacom merger with Neotel is one of five filed in 2014 and still unresolved.

Independent companies

According to the Competition Act (No. 89 of 1998) beyond considering the nature and extent of any abuse of market position or harm to consumers, the commission must also consider the behaviour of the respondent with respect to the procedure of the matter as well how much they co-operate with the tribunal.

In the meantime, both Vodacom and Neotel operate as independent companies until the merger is past the point of no return.

"We now await the Competition Commission recommendation on the matter. In addition to that I can confirm no change in working relationship until the transaction receives all the necessary approvals," said Boorman.

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