tribunal rebukes vodacom
10 April  2008

Speaking with regard to its approval of Vodacom's merger with Global Telematics South Africa, in providing the full reasons for its decision.

"While we are firmly of the view that the acquiring party has wilfully failed to comply with the Act in order to ensure a favourable competition assessment, we believe that even on a full consideration of the evidence, including the documentation belatedly provided to the competition authorities, this transaction would not, on its own, result in a substantial lessening of competition," the Tribunal said.

Vodacom has been consolidating its service provider base over time, leaving only the two large independents, Nashua Mobile and Altech Autopage, outside of its direct network. The Global Telematics (which included service provider Glocell) deal was part of that process.

The Tribunal said that Vodacom had initially withheld a document from it which contained the "real" reasons for wanting to do the deal, that relating to enhancing future profits by reducing the discount rate offered, rather than consolidating more of its subscribers and thereby improving operating margins. The Tribunal said other than that the relevant person was no longer with the company; Vodacom had not provided a satisfactory explanation for its conduct.

But, Vodacom said, in a statement from managing director for Vodacom SA, Shameel Joosub, that it had voluntarily submitted the late document after it, itself had discovered this, and both the Commission and the Tribunal had received it before they made their findings.

"We unequivocally deny that we deliberately withheld information from either the Competition Commission or the Competition Tribunal, or made any attempt to mislead them," Joosub said. "Furthermore we have a high regard for both the Competition Commission and the Competition Tribunal, and have always dealt with these bodies with the utmost respect."

Joosub said Global Telematics' customer base was controlled by two tiers of dealers, and the discounts referred to where between dealers, not to their customers.

The Tribunal said it had dealt with other similar matters regarding Vodacom, including GSM, Teljoy Holdings, Smartcall, Tiscali and Africell. No single such transaction would have resulted in a substantial diminution of intra-brand competition for Vodacom services, the Tribunal said. But, if it had been able to review all six transactions as a single one, "it would have been vulnerable to prohibition".

But, as with the previous transactions, the Tribunal said it would have been inclined to accept the defence that the transaction would improve efficiencies.

"In other words, the acquiring party had little reason to fear prohibition of its transaction and yet it still choose to withhold material information from the Commission that it was obliged to file, to craft its disclosure obligations in such a way as to avoid making this denial on oath, and subsequently, at a later stage, when requested again by the Commission to produce information relevant to the transaction denied, stating that all relevant documents had been provided," the Tribunal said.

Belinda Anderson, www.fin24.com