Communications and Media

Genesis Analytics is recognised as the leading provider of competition and regulatory economic advice in the communications and broadcasting sector in South Africa and across Africa. The telecommunications sector is an evolving market that has experienced significant regulatory reform in recent years as well as extensive technological change. Genesis has in-depth sector understanding of the telecommunications industry, with a long history of involvement in policy and regulatory developments in the sector.

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Expertise Areas

Regulatory economics

Genesis is also a leading provider of regulatory economics advice, offering the full spectrum of expert economic and regulatory accounting services to governments, regulators and private firms. We have played a central role in critical policy and regulatory debates across numerous sectors.  

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Damages quantification

In addition to our competition, regulatory and behavioural economics experience, we have a diverse range of experience in litigated and contested processes, including damages quantification, international trade disputes and policies and other arbitration and High Court proceedings. Our evidence-based and rigorous analysis brings certainty and clarity to arbitration hearings and High Court proceedings in a number of fields, including communications and broadcasting.

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Competition economics

We offer clients a comprehensive range of expert economic services in the area of competition law, and remain the provider of choice for most top law firms when they need to retain expert economists to advise on critical matters. Our application of rigorous economic analysis, using quantitative and conceptual approaches, has resulted in blue-chip companies across Africa routinely relying on us for expert advice and support when they interact with competition authorities.

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Behavioural economics

In our experience organisations often design solutions based on the behaviour of a hyper-rational consumer. The Applied Behavioural Economics practice understands that humans routinely use biases and heuristics to make decisions, and that this often results in atypical or unexpected outcomes.

Broadcasters and telecommunications firms typically deal with large volumes of customers at arm’s length. We have proven that businesses like these can derive considerable value from designing for the fallibility of human decision-making, whether that be in product design, marketing, sales, service, channels, or other functional areas.

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Shared value, transformation and inclusive business

As the world searches for a more inclusive form of capitalism, companies and investors need new commercial models and strategies with high positive social and environmental impact.

We work with leading companies and investors to design societal strategies and business models, not as corporate charity, but at the commercial core of the business.

In South Africa, we advise on meaningful transformation strategies including enterprise and supplier development, inclusive employment, and working with communities.

Projects

Icasa employs Genesis to sharpen SA telecoms competition

Project name:
ICASA priority market study

Service:
Regulatory economics and accounting

Sector:
Communications and Media

Area of Expertise:
Sector strategy and regulatory frameworks

Client:
The Independent Communications Authority of South Africa (ICASA)

Date:
2016 ongoing

Country:
South Africa


The government’s vision for South Africa as set out in the National Development Plan (NDP) recognises the role of technology as a key enabler of economic activity: “By 2030, ICT will underpin the development of a dynamic and connected information society and a vibrant knowledge economy that is more inclusive and prosperous.” (National Planning Commission (2011), National Development Plan 2030: Our Future – Make it Work (“NDP”), p190)

Affordable access to broadband services was also highlighted in the National Broadband Policy - SA Connect. However, key telecommunications markets remain ineffective due to high prices (exemplified by the recent “DataMustFall” campaign), low access and competition complaints about the behaviour of dominant operators. As a result, the social and economic benefits envisaged by the NDP via ICT development have not come to full fruition. 

Having established a long-standing relationship with ICASA, Genesis Analytics has been retained by the regulator to assist with their Priority Market Study to identify key markets that are not characterised by effective competition and may require regulatory intervention to ensure that the goals of the NDP can be met.  

In particular, Genesis will identify the product and service markets in the telecommunications sector that are susceptible to ex-ante regulation and require prioritisation for regulation. Genesis will also consider possible pro-competitive remedies for the priority markets which have been identified.

A vital part of the project will involve engagement with key stakeholders in the telecommunications markets to understand the problems they are facing, which would lead to subsequent engagement with the regulator.

ICASA set to probe SA's high data costs

Expert testimony in seminal media predatory pricing case

Project name:
Expert economic testimony in South Africa's seminal predatory pricing case

Service:
Competition economics

Sector:
Communications and Media

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Media24

Date:
2011 - 2018

Country:
South Africa


Genesis was retained by Media24, a large newspaper and magazine publisher, to defend predatory pricing allegations made against the group by the Competition Commission in what has proven to be South Africa’s seminal predation case.

Predatory pricing generally refers to a strategy where a company prices its products at a low level in the short term to exclude rivals from the market, and then raises its prices in the medium to long term to recoup profits.

In South Africa, section 8(d)(iv) of the Competition Act (No. 89 of 1998) explicitly outlaws predatory pricing. The act also allows for claims of such conduct to be assessed using the general exclusionary clause outlined in section 8(c).

The commission was acting on a complaint by Gold-Net News, a former community newspaper published in the Free State Goldfields region. Gold-Net News alleged that Forum, one of Media24’s publications in that region, had been used as a “fighting brand” and its adverts priced below the production cost of the newspaper from 2004 to 2009 in order to exclude Gold-Net News from the market.

On behalf of the complainant, the commission further alleged that upon Gold-Net News’s exit from the market in 2009, the Forum title was withdrawn and a sister publication, Vista, was left to profit from its resulting market position.

Our work encompassed detailed financial analysis of Media24’s management accounts in conjunction with careful analysis of the economic evidence. As the case unfolded, the expert analysis by the Genesis team traversed a number of important economic issues before the tribunal. These are likely to assist in bringing greater legal certainty in future cases.

Genesis’s involvement in the case spanned the course of the entire matter – the investigation phase; the complaint hearing before the Competition Tribunal, at which it was found that there was no evidence of Media24 pricing below marginal or average variable cost; the hearing on remedies following the tribunal’s decision that Media24 had contravened section 8(c) of the act; and, most recently, Media24’s appeal to the Competition Appeal Court regarding the tribunal’s section 8(c) finding.

In March 2018, following Media24’s appeal of the tribunal's section 8(c) ruling, the Competition Appeal Court – in a unanimous decision – ruled that the test put forward by the tribunal of pricing below ATC with predatory intent had no application under the act. The court set aside the decision of the tribunal, dismissed the commission’s original complaint dating back to 2011, and gave a cost order against the commission for the appeal proceedings.

Full judgment

Business Day: Media predatory pricing ruling brings clarity to competition law

Full article

Media24 welcomes ConCourt dismissal of predatory pricing appeal

Financial model sets new mobile termination rates

Project name:
Expert economic advice and financial cost modelling for the development of new termination rates

Service:
Regulatory economics and accounting

Sector:
Communications and Media

Client:
ICASA

Date:
2014 – 2015

Country:
South Africa


The Independent Communications Authority of South Africa (ICASA) issued new termination-rate regulations during the first half of 2014, which were challenged in the High Court by some of South Africa’s mobile network operators (MNOs), particularly MTN and Vodacom (Challenge to ICASA by MTN and Vodacom). After the court ruled that ICASA had to develop new termination-rate regulations later that year, Genesis was asked to assist in this regulatory process.

‘Termination rates’ are the prices telecommunications operators pay each other to terminate calls originating on each other’s networks (for example, when an MTN customer calls a Vodacom customer, MTN pays a termination fee to Vodacom). For a variety of pro-competitive reasons, regulators around the world set these rates equal to the costs operators incur to provide termination services to each other.

Financial models built by Genesis on behalf of ICASA uncovered the termination costs of South Africa’s fixed and mobile telecommunications operators. This enabled ICASA to introduce truly cost-oriented termination-rate regulation in South Africa for the first time. To maximise their pro-competitive potential, the regulations progressively reduce termination rates over time, to encourage future termination cost reductions. The regulations also recognise that smaller MNOs have higher termination costs and accommodate this through asymmetric rates, making more manageable the adjustments required of smaller MNOs.

Genesis’s independent expertise improved decision-making in two different respects. It first helped the High Court to understand that, while ICASA’s initial 2014 regulations would not harm any operator, scope existed to develop new regulations that would deliver better competition and consumer outcomes. It then helped ICASA to realise this objective, resulting in a best-practice regulatory outcome that has sparked greater price competition between South Africa’s telecommunications operators, particularly between the MNOs.

Genesis Analytics was a critical component of a regulatory process that lowered the costs of communication in South Africa, an outcome that benefits every South African consumer.

Creative content can drive more inclusive supply chain

Project name:
How can a media company build a more inclusive supply chain?

Service:
Shared value and corporate impact

Sector:
Communications and Media

Area of Expertise:
Shared value, transformation and inclusive business

Client:
Confidential

Date:
2018

Country:
South Africa


Genesis was asked by a pan-African television and media company to design a more inclusive supply-chain strategy.

This request came at a time of major disruption in the TV industry: entry of new competitors like Netflix, new platforms like internet and mobile TV, new technology like AI, and rapidly changing consumer habits.

We advised the company to move away from a reliance on ad hoc, low impact, sub-economic supplier development based on a mentality of charity. We advised that it link the inclusive supplier strategy directly to the disruptive challenges faced by the business – an archetypal shared-value solution.

In the television and film industry it is well known that “content is king”, so we proposed that the company link the inclusive supply chain to the creators and producers of local and vernacular TV content.

We proposed the establishment of creative spaces around the continent, based on the concept of the “YouTube Spaces” in which young, trendy, previously disadvantaged creatives and ideators - who happen to be exceptionally well attuned to the target market – can create, present, test and produce content ideas for new TV and film.

This would enable the company to build up previously disadvantaged suppliers as content producers, racially transforming the industry (the social impact) while building a portfolio of local content to gain an edge on foreign competitors (the business impact).

Assessment of damages in R1-billion claim

Project name:
Assessment of a damages claim in the communications sector

Service:
Damages, trade and other litigation

Sector:
Communications and Media

Client:
Large firm in the communications sector

Date:
2014

Country:
South Africa


Genesis provided an independent assessment of the appropriate damages quantum following the repudiation of an agreement between two large South African companies in the communications sector. The analysis was performed on behalf of the defendant in a claim that exceeded R1-billion.

The assessment involved the determination of the loss of profits arising within the context of the agreement having been repudiated before the business was launched. The challenge in this case arose from forecasting the loss of profits where there was no prior business history and where the available data on financial performance was limited.

We assisted the legal team throughout the litigation process, ensuring that sufficient evidence was gathered through the discovery process so that we were able to provide a defendable and reasoned expert opinion on the damages claim. Our project team combined its experience in economics, accounting and modelling with its in-depth understanding of the communications sector to develop a robust economic model in order to quantify the damages claim.

The case was ultimately settled and the input provided by Genesis helped the legal team and the client to determine an appropriate amount as the basis of the settlement negotiations. 

Telkom series of abuse of dominance cases

Project name:
Telkom series of abuse of dominance cases

Service:
Competition economics

Sector:
Communications and Media

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Competition Commission

Date:
2011 – 2013

Country:
South Africa


Genesis was specifically selected by the Competition Commission of South Africa to provide expert reports and testimony in the prosecution of a series of abuse of dominance cases brought against the fixed-line incumbent, Telkom. The multi-faceted complaints focused on exclusionary and exploitative practices designed to inhibit downstream competition in internet access and corporate virtual private networks, including margin squeeze, inducement and excessive pricing.

Combining our deep understanding of telecommunications markets with a meticulous evaluation of the strategy and pricing documents, Genesis was able to determine that Telkom priced its own downstream services below the cost of the necessary wholesale inputs it provided to its competitors and, in so doing, was engaged in a deliberate margin-squeeze strategy. This evidence, and the effective rebuttal of the Telkom defence, was instrumental in the Competition Tribunal finding against Telkom on margin squeeze in the first case, and ultimately imposing a fine of over R400-million.  

In the second case, Genesis used a sophisticated financial model to demonstrate that if Telkom’s own downstream services paid wholesale inputs charged to competitors, then it would be loss-making. A thorough analysis of market data also revealed that this had an exclusionary effect on competitors. Genesis also demonstrated that pricing for certain transmission products was excessive relative to the costs.

The Genesis report was material in moving Telkom to settle the second complaint. Genesis was asked to take a lead role in the settlement negotiations, which fundamentally reshaped the market by bringing about a functional separation between wholesale and retail services, cash fines of R200-million and price reductions of almost R900-million. In approving the settlement, the Competition Tribunal described it as the most sophisticated and far-reaching settlement it had ever seen. 

Expert advice in contested Media24 print merger

Project name:
Expert economic evidence and testimony in Media24's acquisition of sole control of Natal Witness

Service:
Competition economics

Sector:
Communications and Media

Area of Expertise:
Merger analysis and public interest
Expert testimony

Client:
Natal Witness and Media24

Date:
2010 - 2012

Country:
South Africa


Genesis was retained to assess the effects of the proposed move from joint to sole control of the Natal Witness publishing group by Media24, which had evoked substantial opposition from other media groups involved in community newspaper publishing. 

The theories of harm included unilateral and foreclosure effects in newspaper printing and advertising, predation and bundling in publishing, and public interest concerns for small community publishers. 

The project team assisted the Competition Tribunal both by clarifying the appropriate conceptual approach and through a thorough evidence-based assessment of each of the claims. Conceptual clarity was brought to issues such as whether merger control should be concerned with potential predation after the merger or not. 

The careful construction of the evidence was particularly important to the printing foreclosure case, which hinged on a proper understanding of the alternatives available at other printers, as well as their capacity and pricing. Genesis successfully demonstrated that the competition concerns had no merit and that the public interest concern was adequately addressed by the conditions proposed by Media24. The merger was granted conditional approval by the tribunal. 

Meet the Team

Areas of Service Expertise

  • Regulatory economics
  • Damages quantification
  • Competition economics
  • Behavioural economics
  • Shared value, transformation and inclusive business

Projects

Project

Icasa employs Genesis to sharpen SA telecoms competition

Genesis Analytics has been retained by ICASA to assist with their Priority Market Study to identify telecommunications key markets that are not characterised by effective competition and may require regulatory intervention to ensure that the goals of the National Development Plan can be met.  

View Project
Project

Expert testimony in seminal media predatory pricing case

Genesis was retained by Media24, a large newspaper and magazine publisher, to defend predatory pricing allegations made against the group by the Competition Commission in what has proven to be South Africa’s seminal predation case.

View Project

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Leading the team

Stephan Malherbe

Chair and Managing Partner (Competition and Regulatory Economics)

Stephan Malherbe
Chair and Managing Partner (Competition and Regulatory Economics)
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Anthony Felet

Partner (Competition and Regulatory Economics)

Anthony Felet
Partner (Competition and Regulatory Economics)
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Fatima Maria Fiandeiro

Partner (Competition and Regulatory Economics)

Fatima Maria Fiandeiro
Partner (Competition and Regulatory Economics)
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