MTN drops merger concerns as Competition Tribunal set to decide on TPC and Cell C deal

Tawanda Karombo

MTN no longer has concerns regarding the proposed merger between The Prepaid Company (TPC) and struggling Cell C, which the Competition Commission feels will get a new lease of life under majority control by Blue Label Telecoms.

Blue Label’s interests in Cell C are held through TPC. The Competition Tribunal is holding a hearing into the acquisition of a controlling stake in Cell C by TPC.

Advocate Themba Mahlangu, representing the commission at Wednesday’s hearing at the Tribunal, said Cell C stood to get a new lease of life under majority control by Blue Label.

This had helped the Commission to consider approving the merger and acquisition transaction at a time Cell C has been facing turbulent times.

“There is indeed the broader context with which he we appreciated the transaction... that it seeks to throw a lifeline to one of the few mobile network operators (MNOs) that we have. [Cell C] isn't doing well financially, given these benefits from this transaction, it will get another chance of life,” said Mahlangu.

Cell C competes against rivals MTN, Vodacom and Telkom. MTN had raised concerns about the transaction alongside other SA companies such as Pepkor that also retail airtime for mobile operators.

MTN had previously raised concerns over access to its own sales data and the risk of Cell C products being unfairly prioritised. The resolution of these issues was formalised in an amended distribution agreement and conditions attached to the merger approval.

Represented by Advocate Robin Pearse, MTN confirmed it no longer opposed the transaction after the merging parties agreed to a suite of transparency and non-discrimination measures.

The measures encompass greater visibility into how MTN products are distributed by the Blue Label group and non-discriminatory technical integration within Blue Label Telecom’s systems.

MTN was “satisfied that the amendment that it has secured and the two conditions that are of wider application address” its concerns. The merging parties also provided guarantees of equal treatment of MNOs in the distribution of prepaid airtime products.

However, through its distribution arm, Flash, Pepkor raised fresh concerns, arguing that TPC would get favourable pricing for Cell C airtime and that other distributors would not be able to offer similar offerings.

The Commission in its representation said it had analysed horizontal and vertical effects resulting from the merger between TPC and Cell C. Although the two firms operate in the airtime distribution market, the Commission concluded that there were no significant horizontal concerns, as Cell C only distributes its own airtime, while TPC is a general distributor for all major MNOs.

The largest overlap was in prepaid airtime, where TPC already has significant market share. Nonetheless, the incremental change from the transaction was deemed small.

The Commission also explored potential foreclosure risks, under which the merged entity might exclude rival mobile network operators and other distributors. 

The Commission concluded that the the harm under this was not viable as “Cell C is a relatively small player,” while other distributors “would still have access to larger MNO products to remain competitive” in the market.

It was also unlikely that there would be negative employment impacts.

Blue Label has previously committed to paying off Cell C’s debts amounting to about R175 million over the next few months. In addition to restructuring Cell C, Blue Label is also reportedly exploring a possible JSE listing for the mobile operator.

BUSINESS REPORT