The Competition Tribunal on Tuesday made public its reasons for the conditional approval of the merger between Multichoice Subscriber Management, a subsidiary of M-Web Holdings, which owns M-Web and Tiscali.
On January 17 this year, the tribunal approved the merger subject to two conditions. The first required the merged party to terminate its exclusive distribution arrangements with its retail customers. Both M-Web and Tiscali had exclusive agreements with the major computer retailers.
This condition was imposed to lower entry barriers for small internet companies that compete with the merged firm. The tribunal says a brand-new entrant without a client base may have to rely on new sign-ups, and this requires access to the retail market where people purchase their new computers and software.
The tribunal stated that although the market is fairly concentrated, with the merging parties having a significant 34% share, there are a number of reasons for concluding that new entry is likely.
Among these reasons is that the market is one of innovation, with entry possible from many other firms, such as cellphone companies, or firms with large client bases that see provision of this service as an add-on to attract a client base.
Discovery Health was mentioned as a firm now offering low-cost internet services. The tribunal did note that the merger leads to the elimination of Tiscali, M-Web’s most effective competitor.
The second condition related to the retrenchment of employees. This condition arose not out of the hearings, but from an agreement reached between the merged entity and its employees as part of their collective bargaining.
M-Web is acquiring the entire issued share capital of Tiscali from Tiscali International BV. The internet access business of Tiscali will, post-merger, be incorporated into the internet access business of M-Web.
Tiscali Cellular Mobile Telecommunications was sold to Vodacom and the deal was approved by the tribunal earlier this year. — I-Net Bridge