Vodacom and Neotel deal one step closer

Vodacom's share price was up over 3% yesterday on the news that the PIC has bought governments stake in the company but also on the news that the Neotel merger has been recommended for approval. Here is the media statement from the Competitions Commission - Commission recommends approval of Vodacom/Neotel merger with conditions.

There are a number of very stringent conditions to the merger. The normal restriction of not retrenching workers due to the merger is in there. I think intentionally making a company inefficient is short sighted. The next requirement is a R10 billion infrastructure spend over the next 5 years. The comment given is "The conditions also contain unprecedented investment commitments that will go a long way in improving telecommunications services in South Africa". It shouldn't be too hard for Vodacom to reach the conditions as they spent R13.3 billion on CAPEX last year. Part of the reason for the huge spend from Vodacom is due to the African continent mostly skipping fixed line internet due to poor service from the fixed line operators. Basically Telkom dropped the ball, putting the consumer on the back-foot, allowing Vodacom and MTN to take over and empower the consumer. We are still in a place where our internet is shocking compared to developed world standards but mobile internet is very quickly getting faster and cheaper and is not far away from overtaking fixed line on both metrics.

The condition that I totally disagree with is the limit of Vodacom not being able to use Neotel's spectrum. "Vodacom shall not directly or indirectly use Neotel's Spectrum for the purpose of offering wholesale or retail mobile services to any of its customers for a period of 2 (two) years from the Approval Date or 31 December 2017, whichever is earlier." Neotel have access to spectrum that MTN and Cell C don't which means Vodacom could offer a better quality mobile internet service on their new less crowed spectrum. So in the name of competition the consumer is going to suffer because the regulator has been slow in allocating more spectrum to everyone.