Approval for Neotel takeover

THE Competition Commission on Tuesday approved Vodacom’s R7-billion takeover of Neotel‚ but with stringent conditions.

The terms take into account Vodacom’s dominant position in the mobile network market and the contentious issue of its access to Neotel’s radio frequency spectrum‚ which Vodacom has been prevented from using immediately.

That condition is likely to be welcomed by its rivals.

The merger would change the South African mobile network and fixed line industry signifi said commissioner Tembinkosi Bonakele.

“We’ve taken due care in our analysis and recommendation to protect competition now and in the future‚ but the success of these conditions is predicated on the relevant government departments and Icasa [the Independent Communications Authority of SA] promulgating the necessary policies and allocating spectrum for the benefit of the whole country‚” he said.

The Competition Commission’s approval comes two weeks after Icasa approved the deal with conditions that are yet to be disclosed.

The conditions also contain unprecedented investment commitments‚ which will go a long way towards improving telecommunications services in South Africa‚ said Bonakele.

Vodacom will be expected to invest R10-billion in fixed network‚ data and connectivity infrastructure. At least 50% of the amount should be invested in all fixed network elements required to enhance services to homes and enterprises‚ including the development of value-added services.

Vodacom had said previously the acquisition of Neotel would help it fast-track its fixed line network rollout.

The commission has also recommended that within two years‚ Vodacom must ensure the value of the shares held by its black economic empowerment (BEE) shareholders increases by R1.4billion‚ which is the value attributable to Neotel‚ multiplied by 19%‚ which is the current BEE shareholders’ direct shareholding in Neotel.

Should the BEE obligations imposed by Icasa on the deal exceed the value set by the commission then the obligations imposed by Icasa will apply.

The commission found the merger was likely to substantially lessen or prevent competition in the mobile services market. Vodacom is the biggest mobile operator in SA with 32 million subscribers. It also offers some fixed line services.

Its rivals have opposed the deal‚ saying it will give the group an unfair advantage. — BDlive