The Competition Commission has permitted the sale of 5 713 South African passive tower infrastructure sites owned by MTN to New York Stock Exchange-listed company IHS Towers, however, several stringent conditions are attached to the deal.
The approval comes after MTN’s announcement in November 2021 that it will sell a big portion of its tower portfolio to IHS Towers for about R6.4 billion.
The mobile network operator mentioned that the transaction will include the outsourcing of power and related services across the MTN SA site footprint of approximately 12 800 sites.
Though the commission has given MTN the green light, it announced in a statement on Wednesday that it is concerned that the transaction may exclude rivals from access to space on the affected towers and exclude rival independent towers and vendors from the market.
It explained that it is mostly bothered by “the ability of SMME (small, medium, and micro enterprise) and HDP (historically disadvantaged people) tower vendors and independent tower operators to effectively participate in and expand the tower infrastructure market, particularly at a time when mobile operators are considering the technical and other imperatives of rolling out 5G technology”.
The deal is subject to the following conditions:
- MTN SA may not retrench any of its South African employees as a result of the merger for a period of 24 months from the implementation date.
- IHS SA must achieve Level 4 (minimum) of broad-based black economic empowerment (B-BBEE) status within 18 months of the implementation date and must reach Level 1 status within four years.
- IHS SA must also achieve a 30% black ownership within 24 months of the implementation date.
“Further particulars of the B-BBEE condition are subject to a confidentiality claim made by the merging parties. The merging parties’ confidentiality claim will be adjudicated by the Tribunal,” the commission said in a statement.
To avoid exclusions, the commission limits preferential allocation of MTN’s new site rollout in terms of both the number of sites and the period in which IHS SA may be given first preference.
The commission also expects MTN SA to spend R60 million per annum for 10 years starting from the implementation date to support SMME and HDP-owned vendors in the telecommunications sector.
“The annual spend shall escalate by CPI in each year for 10 years,” it said.
Following the deal, the companies will remain direct competitors in the passive tower infrastructure market since MTN SA will keep some of its tower infrastructure which is not part of the deal.
Media analyst Arthur Goldstuck told Moneyweb that the commission has had to “walk a fine line” as their main objective is to ensure there is minimum disruption to the economy.
“On the one hand, MTN is being allowed to improve its competitive positioning, but on the other it’s not allowed to dismiss any employees and it has to continue supporting the small business ecosystem that acts as service providers to the tower industry,” he said.
“It’s not allowed to give IHS Towers high preferential treatment in allocating projects that can go to small businesses. It’s a very interesting requirement which is [also] unusual because they are essentially saying that MTN can’t give its own subsidiary preferential treatment. But [one] can understand, given that IHS gives MTN a very strong market position, it needs to give back by continuing to support smaller businesses.”
Palesa Mofokeng is a Moneyweb intern.