Proposed South Africa telecoms deal dropped over antitrust ruling

The Commission said on 17 August (2-page / 114 KB PDF) that it had recommended the Competition Tribunal, the country’s antitrust adjudication body, to reject the proposal under which MTN South Africa, a subsidiary of the multinational MTN Group, would acquire certain Telkom radio access network (RAN) assets.

Telkom and MTN signed a heads of agreement in 2014 to extend their existing roaming agreement to include bilateral roaming and outsourcing of the operation of Telkom’s RAN.

Telkom Group chief executive officer Sipho Maseko said: “While the Commission’s decision is disappointing, Telkom and MTN have agreed not to proceed with the transaction, as we wish to avoid a protracted tribunal hearing.”

According to the Commission, while the proposed deal “does not involve the combination of MTN’s and Telkom’s mobile retail businesses, the Commission found that the proposed transaction is likely to substantially prevent or lessen competition in the mobile services market”. The access to additional spectrum capacity by MTN would “confer first mover advantages to it relating to network speed, capacity and mobile offerings”.

MTN would, the Commission said, “be able to gain a significant competitive and time advantage, offering network and services that cannot be significantly constrained by rivals, particularly given the market position of Cell C and Telkom Mobile”.

“Importantly, the nature of the transaction is such that Telkom Mobile’s ability to aggressively grow and respond to competition will be significantly curtailed, as the mobile data capacity available to Telkom will be limited by the agreement between the merging parties, whereas MTN’s capacity will not be limited,” the Commission said.

The proposed deal would also be likely “to have a significant impact on the structure of the South African mobile markets and future competitive dynamics”, the Commission said. “This is also a negative effect especially when considering that South Africa experiences higher mobile prices than other comparable countries in the world. There were several objections to the merger received from third parties in the industry.”

According to the Commission there are four licensed mobile network operators in South Africa – Vodacom, MTN, Cell C and Telkom Mobile. Vodacom and MTN “were the original mobile operators” licensed to provide national cellular telephony services in September 1993. “At that time, Telkom was the de jure monopoly provider of public switched telecommunication services and facilities services,” the Commission said. Cell C was licensed in June 2001 and started operations in November of that year.

Telkom Mobile was created as the mobile business arm of Telkom in 2010. As of 31 March 2015, Telkom said it had around 3.4 million telephone access lines in service and 964,196 ports connected via MSAN (multi-service access node) access.

A survey published last year by Swedish company Ericsson (8-page / 224 KB PDF) said sub-Saharan Africa is “rapidly closing in” on the global penetration rate of mobile communications usage. The survey said mobile financial services are increasingly popular as the use of information and communications technology grows.