How Vodacom and Maziv convinced everyone they had changed

Daily Maverick

4 days ago

All the details from the Vodacom/Maziv merger Competition Appeals Court hearing where R12bn in promises nearly caused a fender-bender.
When senior counsel representing the Competition Commission, advocate Daniel Berger, said, 'My lord, as an officer of the court, I am duty bound to commit this statement to the public record,' I nearly drove my car off the road in shock.
I was on my way from collecting my kids from school to drop my son off at his football practice, and things were getting spicy in the post-lunch session of Competition Appeals Court (CAC) proceedings. But how did we get here?
The devil in the details
Earlier this month, I reported on the Competition Commission's dramatic about-turn on the Vodacom/Maziv merger – how they went from fierce opposition to sudden support after the parties agreed to 'revised conditions'. Now, sitting in back-to-school traffic with a Teams call crackling through my car speakers, I got the full story of exactly what those conditions entail.
And frankly, it's either the most comprehensive set of telecoms concessions in South African history, or the most elaborate corporate sleight of hand.
The headline number that had everyone's attention was always going to be the money.
Maziv has committed to a cumulative capital expenditure (capex) of 'at least R12-billion' over five years for network expansion and maintenance. That's 'two more (billions) than it was before,' as one counsel helpfully clarified for those of us trying to do math while navigating parking lot chaos.
But here's where it gets interesting – and where my daughter, sitting in the passenger seat doing homework, started asking why I was shouting at my laptop again: of that R12-billion, R9-billion will be spent specifically on new fibre projects, with the commitment period restarted from April 2025. They've effectively put the 'clock back to zero' on their investment timeline.
The kicker? The capex will be 'primarily but not exclusively spent on roll-out of infrastructure in low-income areas.' This isn't just about passing homes – it's about actually connecting them.
The million homes promise
Maziv has undertaken to pass at least one million homes in lower-income areas over five years, with at least 350,000 homes in what they're calling 'key areas' (think Alexandra Township), what counsel is calling the 'lowest of low-income homes'.
My daughter is now asking what I mean when I keep muttering about 'homes passed'. How do you explain to a 14-year-old that a telecoms company just promised to wire up the townships?
But the really fundamental concession – the one that had legal eagles in the virtual courtroom practically purring, is this: Maziv must provide 'sufficient capex to ensure that every home passed in terms of the commitments that wishes to be connected on the prevailing terms and conditions for connection is connected' for five years.
What this means
They can't just run fibre past your house in Alex and then charge you R2,000 to actually connect. They have to budget for actual connections, not just the theatrical gesture of running cables down your street..
Boardroom chess
The shareholding arrangements have been tweaked in ways that would make any corporate governance lawyer proud. Vodacom still gets its initial 30% co-controlling equity interest, but the path to 40% just became significantly more complicated.
Under the revised conditions, which now meet muster for Compcom sign-off, 'Vodacom can't increase its shareholding beyond 34.9% without the consent of the Commission.' And if it wants to move to more direct forms of control, it'll need fresh merger approval entirely.
I gaze directly into the sun, trying to follow the technical submissions about board composition. All parties are now trying to explain, much to the chagrin of the merging parties, to Judge President Norman Manoim that the 'extra four percent' shareholding isn't the nothingburger he keeps making it out to be.
You see, the composition of the board has been restructured since the Competition Tribunal blocked the deal: seven Maziv directors, seven Vodacom directors, and now four independent directors (up from three), plus CEO/CFO. Crucially, 'Vodacom will not be entitled to veto their appointment' of independent directors.
It's corporate governance with training wheels, designed to address exactly the control concerns that got this deal prohibited in the first place.
Clearing the blockade
The legal arguments against the Competition Tribunal's original prohibition are where this hearing gets properly spicy. Advocate Jerome Wilson, representing the merging parties, spent considerable time arguing that the tribunal had 'misdirected itself' through what he called 'internal mistrust' and 'cynicism or bias'.
The tribunal, Wilson argued, relied on 'extraordinary allegations' about alleged past collusion between Vodacom and MTN from media reports dating back to 1994 – allegations that were never properly tested in proceedings. This context, he said, apparently 'infected the Tribunal's entire reasoning process'.
Wilson's most damning critique focused on the tribunal's 'counterfactual analysis', basically, what would happen without the merger. The tribunal assumed Vodacom would become a very significant fibre player in low-income areas and that other players would fill any investment gap.
The evidence? A Dark Fibre Africa representative testimony saying it would take 'at least three years for me to find an investor and I cannot guarantee you that I would find one', and that 'nobody else has come up since 2015' other than Vodacom.
The tribunal's reliance on speculation rather than what Wilson calls 'real world outcomes' was deemed a fundamental error. But this does not erase the other issues.
The maths starts math-thing
While lawyers argued legal theory, the market realities are crazy. Pre-merger, Maziv (through Vumatel) commanded 32% of the fibre-to-the-home (FTTH) market with 2,050,000 homes passed. Vodacom's standalone fibre network? A measly 2.5% with 158,000 homes.
Post-merger, the combined entity will control 34.5% of homes passed (2,208,000) and 34.4% of homes connected (885,000). That makes them significantly larger than Telkom's Openserve at 20.9% of homes passed.
I explain to my now fully engaged teenager that this deal is essentially creating a duopoly in South Africa's wholesale fibre market: Vodacom-Maziv versus Openserve, with everyone else scrambling for scraps.
Which was the original Compcom opposition point, until the merging parties sweetened the deal to get government buy-in – the DTIC and communications minister both supported the appeal.
Honeypot dealmaking
These post-tribunal public interest commitments read like a policymaking wet dream. Free gigabit per second fibre connections for all public schools, libraries, and clinics passed by the FTTH network roll-out. More police stations getting Fixed Wireless Access (FWA) products. Enhanced employee share ownership plans.
Vodacom has also committed to achieving 90% 5G population coverage within five years, with obligations to connect additional FWA users that will require them to 'price their FWA competitively'.
For pricing protection, FTTH can't increase prices for the lowest-price options for two years, and there can be 'no forced upgrades' for five years – protecting lower-income consumers from being pushed on to more expensive packages.
You see, the tribunal's concern was that Vodacom's veto rights could allow it to force Maziv to act against its profit-maximising interests – essentially, to favour Vodacom over other wholesale customers.
The merging parties argued this was a 'fundamental conceptual error'. Vodacom would account for 'less than 20% of Maziv's revenues', so any theoretical side payments or compensation for non-profit-maximising behaviour simply wouldn't make economic sense.
The burden of debt
What's often lost in the regulatory theatre is why Maziv needed this deal in the first place. CIVH, Maziv's parent company (owned by Remgro), was carrying R19.5-billion in debt by mid-2024. This merger provides the capital injection needed to fund the next phase of fibre expansion, particularly into areas where the business case is marginal.
The 'lessening of competition' identified by the tribunal primarily affected 'certain wealthier households' – about 2,000 to 7,500 homes, according to the merging parties. They argued this was insignificant when weighed against connecting a million low-income homes.
One genuinely innovative aspect of the revised conditions is an enhanced 'fast-track interim relief process' for foreclosure concerns. This allows an expert to make binding determinations while formal investigations are under way, 'taking the load off the commission' for complex, time-sensitive issues.
It's regulatory innovation born from regulatory failure. A recognition that the traditional competition processes aren't nimble enough for rapidly evolving telecoms markets.
Concession is a town in Zimbabwe
As I finally switch off the Teams call, the bigger picture comes into focus. Compcom's about-turn isn't just about accepting better conditions, it's about accepting that South Africa's digital infrastructure reality requires uncomfortable compromises.
The revised deal creates what's being called a 'fibre powerhouse with unparalleled market scale' while theoretically addressing competition and public interest concerns. Whether those theoretical protections work in practice remains to be seen.
But here's the uncomfortable truth that emerged from the proceedings: the same companies we don't trust to compete fairly are the only ones with deep enough pockets to bridge our digital divide.
In a country where millions still lack basic connectivity, that might be a trade-off we're willing to make. DM