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Competition court approves acquisition of Vumatel by CIVH



The South African Competition Court approved the acquisition of Vumatel by Community Investment Ventures Holdings (CIVH), owned by Remgro.

After this acquisition, CIVH will have exclusive control of Vumatel, in addition to Dark Fiber Africa (DFA), of which it already has controlling interest.

DFA creates and runs the fiber infrastructure and then leases it to last-mile fiber vendors such as Vumatel. In turn, Vumatel provides fiber access to ISPs, which offer the Internet through this infrastructure to the public.

The Competition Court began investigating this agreement in April 2019, following a complaint by Octotel, a provider of competitive fiber infrastructure that is prominent in Cape Town and indirectly owned by Remgro.

Octotel claimed that DFA is the largest backhaul provider in South Africa, which means that being owned by the same company as Vumatel would be a concern for vertical competition.

CIVH also controls SA Digital Villages (SADV), a provider of Internet and fiber services at home, specializing in the installation and operation of fiber networks in residential areas.

Concerns and conditions

In its statement approving the acquisition of Vumatel, the Court listed a number of concerns and conditions of the merger.

The Competition Commission raised vertical competition concerns in assessing the merger as it concluded that DFA is considered to be the largest backhaul provider, assessed on a regional basis.

It also raised concerns about horizontal competition due to the indirect control of Remtrolo from rival fiber supplier Octotel.

Octotel relies on DFA to provide backhaul services in the Western Cape region and raised concerns about the possible favoring of Vumatel by CIVH and DFA over rivals.

Subsequently, Octotel was granted permission to make submissions to the Court as an "intervener" and implored the organization to prohibit the acquisition of Vumatel by the CIVH.

The transaction was approved although this decision comes with a number of conditions to ensure continued competition in the fiber infrastructure market.

"The Court approved the transaction subject to conditions requiring the Merged Company to retain a model of open access service provision for some of its post-merger services as well as increased transparency mechanisms and the obligation not to discriminate against its customers competing with Vumatel, "the organization said.

"Conditions also include two public interest obligations, one of which is confidential because of the sensitivity of the business."

"The other provides that mergers provide free fiber services without encapsulation to public and private schools that their networks ignore," the court said.

The terms of the acquisition will apply for a period of 10 years from the date of implementation of the merger.

The CIVH's portfolio would look like this after Vumatel was acquired by the company.

CIVH

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