The issue of unequal connectivity in South Africa must be addressed
Last year, the Competition Tribunal prohibited Vodacom’s purchase of a stake in Remgro’s fibre businesses — Vumatel and Dark Fibre Africa (DFA). But then, South Africa’s minister of trade, industry and competition, Parks Tau, submitted notice to appeal. This is worrying.
While Vodacom marketed the proposed transaction as an effort to “connect underserved communities”, a cynical reading of the minister’s actions suggests something else: an attempt to systematically undermine regulators’ efforts to address the issues addressing unequal connectivity. This is ironically being done in the name of expanding access.
The biggest claim made in support of the merger is that its prohibition will result in delays connecting underserved, low-income communities. Indeed, given the headstart and excessive profitability of Vodacom, they do have the ability and funds to transform the connectivity landscape on a national scale. But is it simply not true that the prohibition will result in these communities lacking internet connectivity. Alternatives such as Net Nine Nine, Ikeja Wireless in various townships in Gauteng and the Western Cape and fibre network providers like Frogfoot, among others, have emerged where the transaction parties do not reach.
And this is good news. It has been found that where new entrants such as Rain Mobile emerge, even if there is limited effect on headline prices of mobile data, “the assessment on promotional offerings demonstrated much more vigorous competition among the operators through lower prices and product variety”.
Furthermore the merger succeeding has the potential to replicate the effective duopoly held in mobile telecommunications by Vodacom and MTN — which not too long ago had its eyes on Telkom — in the alternatives.
Obfuscation and lies
Like the department, parties such as the Democratic Alliance and others have uncritically parroted the transaction party claims that the transaction would “create up to 10 000 jobs”. But, during tribunal proceedings, the department’’s legal representative admitted that the number is “… a little bit more imprecise because it relates to direct and indirect employment opportunities”.
When pressed to clarify the difference between a job and a job opportunity, he added: “A job is when somebody fills the job.” He went on to define a job opportunity as: “If you can show that you have put out an advertisement, that there is a particular specification for a job, it will have this salary committed to it, and the specifications of that job, that’s a job opportunity …”
Effectively the department argued that the transacting parties would satisfy merger requirements if allowed to simply advertise jobs and not necessarily fill them.
The promotion of ownership by historically disadvantaged people and groups has also been touted as another benefit of the transaction. Yet, equity ownership by historically disadvantaged people is already a prerequisite for telecommunications operators seeking licenses.
This affirms the Competition Commission’s view that there are “no significant benefits arising from the proposed merger that were not already independently planned prior to the merger or were not already in place”.
Of course, this is not Vodacom’s first rodeo at obfuscation and downright dishonesty. After the Data Services Market Inquiry, the Competition Commission recommended that mobile network giants Vodacom and MTN drop data prices by 30% to 50% or face prosecution. Vodacom subsequently settled with the commission and agreed to a multi-year price drop starting 1 April 2020. Most notably the one gigabyte (GB) 30-day data bundle dropped from R149 to R99 and then R85 April the following year. A price drop of just over 40%, making the bundle more accessible to consumers that were entirely reliant on smaller bundles which cost more per megabyte (MB).
Despite facing prosecution, Vodacom marketed the price reduction as part of a benevolent effort on their part to “promote digital inclusion”.
Another example is that in opposition to public outcry about high data costs, mobile network operators blamed delays in licensing high demand spectrum. Although there is no doubt that spectrum constraint has been a barrier to coverage expansion, there was no evidence supporting that the licensing of spectrum would lead to lower mobile data costs for low-income consumers. Indeed in 2022 spectrum was auctioned with Vodacom spending big in the process. This has not resulted in the spread between big bundles and small closing ; some prices have since increased.
During Competition Tribunal proceedings, the department itself pointed out that some of the commitments by Vodacom “are also set out in the spectrum licence of Vodacom that were granted pursuant to the spectrum auction conducted by ICASA [Independent Communications Authority of South Africa ]”.
Allowing Vodacom’s use of commitments as leverage to advance the merger undermines the government’s own growing recognition of spectrum as a public good that should be used to meet public interest objectives.
Competition
Competition has played a crucial role in lowering data costs for consumers who have more connectivity options available to them. As wealthier consumers gained access to alternatives to mobile data, they began offloading their internet use there. This is not unusual. Broadband statistics from countries in the Organisation for Economic Co-operation and Development (OECD) show that mobile data demand dropped over the four years prior to 2022. The decline is attributed to the rise in fibre subscriptions.
In South Africa this shift resulted in significant price drops in mobile data packages targeted at these consumers. This contributed to those who can afford contracts and large data bundles getting better value, alongside from the competitive interaction between fixed wireless access and fibre.
So it’s no surprise that as alternatives to mobile data expand coverage to underserved, low-income communities, industry giants have their eyes on cashing in.
Vumatel’s own survey reportedly found that township dwellers are “embracing fibre at increasing rates”, attributing this to mobile data being expensive. Low-income consumers offloading to alternatives poses a threat to the excessive profits of mobile network operators such as Vodacom, who have for years profiteered from exploitative pricing for low-income consumers. The merger would therefore deny low-income consumers the advantages that competition has allowed for “more connected” consumers over the years. Thus hurting the very consumers for whom the transaction is purportedly being pushed.
Without a doubt, prohibiting the merger will neither solve the problems in the telecommunications industry nor result in immediate affordable connectivity for consumers. But effective regulation, not replicating obstacles found in the mobile data wholesale market — problems accurately identified by the Competition Commission — will be essential for ensuring affordable meaningful access for low-income consumers. Yes, Vodacom has invested significantly in South Africa, especially in network investments. But this cannot be used to further advance the network’s excessive profitability.
The interests of select telecoms giants should not be allowed to transcend consumer welfare, nor should public interest be sacrificed at the altar of profit — which is what this transaction would do. The regulatory bodies attempting to prevent this are on the right side of history. Koketso Moeti has a long background in civic activism and has worked at the intersection of governance, communication and citizen action. In 2024 she was an inaugural New Voices Advanced Advocacy Programme fellow. She is also an inaugural Keseb democracy fellow; a Mulago Foundation Rainer Arnhold fellow; inaugural Collective Action in Tech fellow; an Atlantic Fellow for Racial Equity; an inaugural Obama Foundation fellow and an Aspen New Voices senior fellow. Follow her on Twitter at @Kmoeti