Expert advice on Vodacom-Neotel merger

Genesis was contracted by the Competition Commission of South Africa as expert economic advisers in the assessment of a proposed merger between Vodacom South Africa, the largest mobile network operator in the country, and Neotel, the country’s second national fixed-line operator.

The analysis encompassed a competitive assessment of the fixed-line market in South Africa, including both the wholesale and retail segments.

It also provided an assessment of general internet access; network quality; costs, pricing and margins; virtual private networks (VPNs); managed network services ; the various hosting segments; current spectrum allocations and policy in South Africa; international best practice with regard to spectrum allocations and trends; and the impact of spectrum allocations on competition. It concluded with a discussion of potential remedies to address the credible theories of harm.

The Competition Commission recommended that the merger be approved with conditions relating to the use of the long-term evolution (LTE) spectrum and to the investment in fixed-line infrastructure. The merger was, however, opposed by a number of other operators and was set down to be heard by the South African Competition Tribunal.

As the experts acting for the Competition Commission, the team’s competitive assessment was filed with the Tribunal for consideration, and Genesis partner and telecoms expert, James Hodge, was due to testify on behalf of the commission. However, the parties subsequently revised the transaction structure.

The Tribunal ruled that the agreement was sufficiently different as to require that the transaction be re-notified and re-investigated by the Competition Commission. The parties abandoned the case in March 2016.