Nicola Mawson
The Competition Commission chief economist and acting deputy commissioner, James Hodge, came under fire at the Competition Tribunal yesterday for allegedly picking and choosing facts that suited the Commission.
Hodge was being cross-examined during hearings as to whether a merger be allowed to go ahead through the combination of Vumatel and Dark Fiber Africa, which Vodacom will buy from Remgro, to create Maziv, which would be the largest fibre infrastructure player in South Africa.
The Commission has slammed the proposed merger between Vodacom, Vumatel and Dark Fiber Africa as being anticompetitive and having the potential to create a pivotal shift in the telecoms sector, taking the industry backwards.
In addition, concerns have been raised that Vodacom will have main control over the merged company, even though it will only own between 30% and 40%, because it will be providing funding for investment.
Vodacom aims to buy DFA and Vumatel from Remgro through a combination of R6 billion cash and the contribution of some transmission access fibre network infrastructure at a valuation of R4.2bn.
Hodge said that marginalised areas were not benefiting from the availability of broadband at decent speeds, and that Vodacom had sufficient spectrum to provide additional coverage at high speeds.
Hodge said his understanding of the merger would be that Vodacom would form joint ventures going forward to develop fibre, instead of leasing connections to the pipes as had previously been the case.
He said the proposed merger would allow Vodacom preferential pricing in terms of connectivity to the fibre infrastructure, as well as prioritisation should any repair work on lines be required.
“Vodacom will be by far the biggest player purchasing from Maziv. And so, you could easily justify, you put in that a standard, even a standard volume discount for value based discount, then easily justify lower prices for Vodacom,” he said.
Hodge added that it was easy enough to ensure that any faults Vodacom logs were placed at the top of the list as there would already be a priority schedule in place in terms of Vumatel and DFA’s response times to outages.
However, during cross-examination yesterday, Duncan Turner (SC) on behalf of Vodacom, said Hodge was intimating that the Tribunal should ignore Vodacom’s evidence.
“I think you’ve ignored a lot of the evidence,” said Turner. He added that Hodge’s answers “shows a complete lack of objectivity and a complete cherry picking of the evidence that's being replaced before this tribunal”.
“What you have done is gone way outside your area of that. You have introduced technological arguments to try to counter the position that's being presented, where you are completely unqualified to make. And you have ignored the evidence of the experts who are qualified,” Turner added.
Turner also pointed out that the research Hodge had included in his evidence bundle dated back to 2020 and 2021.
Peter Takaendesa, head of equities at Mergence Investment Managers, has previously said that, as an investment group, it was concerned that the commission has decided that the only outcome it wishes to see was an outright prohibition of the deal.
He said it did not also “give some weight towards encouraging investment in the South African economy”.
Takaendesa has also noted that both Vodacom and MTN have realised that it may be too late already to build large national fibre networks of their own, and are looking to buy minority stakes in existing fibre network operators to optimise capital expenditure and share infrastructure, such as is being seen in tower markets and related consolidations taking place globally.
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