Dark Fibre Africa (Pty) Ltd v MCT Telecommunications (Pty) Ltd (019554) [2014] ZACT 62 (12 November 2014)
- Citation
- [2014] ZACT 62
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Yasmin Carrim, Andreas Wessels, Fiona Tregenna
- Case number
- 019554
More details
- Court
- Competition Tribunal
- Panel
- Yasmin Carrim, Andreas Wessels, Fiona Tregenna
- Case number
- 019554
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed transaction is an internal restructuring within the CIVH Group, transferring ownership of MCT from CIET to DFA. The Commission's investigation revealed no horizontal overlap and only a pre-existing vertical relationship between the parties. The merger would not result in customer or input foreclosure, as both DFA and MCT would continue to serve other customers. The transaction would not adversely affect employment or raise other public interest concerns. Accordingly, the Tribunal concluded that the merger is unlikely to substantially prevent or lessen competition in any relevant market and raises no public interest issues. The merger was approved unconditionally.
Court disposition
Merger approved unconditionally.
Orders
- The proposed merger between Dark Fibre Africa (Pty) Ltd and MCT Telecommunications (Pty) Ltd is approved without conditions.
02
Material facts
Parties
Dark Fibre Africa (Pty) Ltd
Applicant Counsel: Janine Simpson and Christopher KokMCT Telecommunications (Pty) Ltd
Respondent03
Procedural history
Posture
Merger Approval / Reasons for Decision
04
Questions and positions
Legal issues
- 01
Whether the proposed intra-group merger would substantially prevent or lessen competition in any relevant market.
- 02
Whether the transaction raises any public interest concerns, including adverse impact on employment.
Party arguments
- Applicant
- The merging parties argued that the transaction is an internal restructuring within the CIVH Group, intended to simplify the group structure. They submitted that the merger would not adversely affect competition or employment, and that MCT would continue to provide services to other customers post-merger.
- Respondent
- The Competition Commission found no horizontal overlap between the parties, as DFA operates in dark fibre infrastructure and MCT in cable managed services. The Commission identified a vertical relationship but noted this existed pre-merger and concluded there would be no customer or input foreclosure. The Commission recommended unconditional approval as the transaction would not substantially prevent or lessen competition, nor raise public interest concerns.
05
Court’s reasoning
Legal principles
- 01
Competition Act, No. 89 of 1998
A merger will not be prohibited unless it is likely to substantially prevent or lessen competition in any relevant market.
- 02
Competition Act, No. 89 of 1998
Public interest considerations, including employment effects, must be assessed in merger proceedings.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction is an internal restructuring within the CIVH Group, transferring ownership of MCT from CIET to DFA. The Commission's investigation revealed no horizontal overlap and only a pre-existing vertical relationship between the parties. The merger would not result in customer or input foreclosure, as both DFA and MCT would continue to serve other customers. The transaction would not adversely affect employment or raise other public interest concerns. Accordingly, the Tribunal concluded that the merger is unlikely to substantially prevent or lessen competition in any relevant market and raises no public interest issues. The merger was approved unconditionally.
Obiter and limits
- The Tribunal noted that internal restructurings within corporate groups are generally unlikely to raise competition concerns unless they alter market dynamics.
- The merging parties' confirmation that employment would not be adversely affected was accepted without further investigation.
Court disposition
Merger approved unconditionally.
- The proposed merger between Dark Fibre Africa (Pty) Ltd and MCT Telecommunications (Pty) Ltd is approved without conditions.
Source and reliance status
Competition Tribunal
This page organises the available record for research. Confirm quotations, current status, and subsequent treatment against the official source before relying on the case.
Judgment reading view
Judgment text
The complete available source text.
Competition Tribunal
Judgment
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 019554
In the matter between:
DARK FIBRE AFRICA (PTY) LTD.......................................................................Primary Acquiring Firm
And
MCT TELECOMMUNICATIONS (PTY) LTD..........................................................Primary Target Firm
Panel : Yasmin Carrim (Presiding Member)
: Andreas Wessels (Tribunal Member)
: Prof Fiona Tregenna (Tribunal Member)
Heard on: 22 October 2014
Order Issued on: 22 October 2014
Reasons Issued on: 12 November 2014
Reasons for Decision
Approval
[1] On 22 October 2014, the Competition Tribunal (“Tribunal”) unconditionally approved the merger between Dark Fibre Africa (Pty) Ltd (“DFA”) and MCT Telecommunications (Pty) Ltd (“MCT”).
[2] The reasons for approving the proposed transaction follow.
Parties to transaction
Primary acquiring firm
[3] The primary acquiring is DFA, a firm incorporated in accordance with the company laws of the Republic of South Africa. DFA is controlled by Community Investment Ventures Holdings Ltd (“CIVH”). CIVH is jointly controlled by New GX En Commandite Partnership 2 (“New GX”) and Industrial Electronic Investments (Pty) Ltd.
[4] New GX is controlled by the Khuno Share Trust. The Khuno Share Trust is for the benefit of Mr. Khudusela Pitje and the Khuno Family Trust. Industrial Electronic Investments (Pty) Ltd is controlled by Remgro Ltd.
[5] DFA owns “dark fibre” communications infrastructure, which it operates and maintains. It inter alia leases out infrastructure elements (such as fibre and ducts) to licenced operators of telecommunications service providers. The dark fibre is used for the transmission of metro and long haul telecommunications traffic.
Primary target firm
[6] The primary target firm is MCT which is a wholly owned subsidiary of CIE Telecommunications (Pty) Ltd (“CIET”), which is in turn wholly owned and controlled by CIVH and therefore falls within the CIVH Group.
[7] MCT is a specialist installations contractor of fibre based communications infrastructure, including maintenance and repairs. MCT further provides services referred to as ‘Cable Managed Services’ (“CMS”). These services include:
• Network engineering support;
• Programme and services management which includes contractor and material management, installation quality management, budget and timeline management;
• Installation management; and
• Maintenance of optical fibre based communications infrastructure.
Proposed transaction and rationale
[8] In terms of an Intra-Group Sale of Shares Agreement, DFA intends to acquire the entire issued share capital in MCT from CIET. Pre-merger MCT is wholly owned by CIET, which in turn is a wholly owned subsidiary of CIVH. The proposed transaction thus amounts to an internal restructuring in terms of which the ownership of MCT will be transferred from CIET to DFA.
[9] The merging parties submitted that that the internal restructuring is for purposes of simplifying the CIVH Group structure.
Impact on competition
[10] According to the Commission’s findings the proposed transaction does not give rise to a horizontal overlap of the merging parties’ activities. DFA operates as a provider of dark fibre communications infrastructure whereas MCT operates in the CMS market.
[11] The Commission however found there to be a vertical relationship between the merging parties in respect of services (CMS) offered by MCT to DFA and other services offered by subsidiaries within the CIVH, New GX and Remgro Group. However, this situation existed pre-merger. The Commission concluded that the proposed transaction will not result in any customer or input foreclosure in that the merging parties will continue to provide their products and services to other customers after the proposed merger.
[12] We concur with the Commission’s competition assessment, i.e. that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market.
Public interest
[13] The merging parties confirmed that the proposed transaction will not result in an adverse impact on employment.1 The proposed transaction further raises no other public interest concerns.
Conclusion
[14] In light of the above we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market In addition, no public interest issues arise from the proposed transactions. Accordingly we approve the proposed transaction unconditionally.
12 November 2014
DATE
Andreas Wessels
Yasmin Carrim and Prof Fiona Tregenna concurring
Tribunal Researcher: Derrick Bowles
For the merging parties: Janine Simpson and Christopher Kok of Webber Wentzel
For the Commission: Relebohile Thabane and Grace Mohamed
1Merger Record inter alia pages 8 and 64.
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