COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 16/LM/Feb06
In The Large Merger Between
The Prepaid Company (Pty) Ltd Acquiring firm
And
Matragon (Pty) Ltd Target firm
Reasons for Decision
Approval
1. On 12 April 2006, the Tribunal unconditionally approved the proposed
merger transaction between the abovementioned parties. The reasons for the
decision follow.
Parties
2. The acquiring firm is The Prepaid Company (Pty) Ltd (“Prepaid”). Blue
Label Investment (Pty) Ltd group of companies owns 69.6% of the shares in
and claims against Prepaid. The remaining 30.4% of the shares and claims
against Prepaid are owned by Shotput Investment (Pty) Ltd. Prepaid controls
a number of firms none of which are relevant for the purposes of this
analysis.1
3. The target firm is Matragon (Pty) Ltd (“Matragon”) which wholly owns three
subsidiaries namely CES Manufacturing (Pty) Ltd, Airtime Xpress (Pty) Ltd
and Comm Express Services South Africa (Pty) Ltd and collectively known as
the Matragon group. The current shareholders of Matragon are the MAPSC
Family Trust (34%), DAB Trust (4%), PPJ Family Trust (9%), S Frank Family
Trust (9%), G Templehoff Family Trust (10%) and RAB Family Trust (34%)
collectively known as (“the Trusts”).
1 A list of those firms can be found on page 2 of the Commission’s Report.
Transaction
4. The transaction involves Prepaid acquiring 50% shares in and claims in
Matragon group. Each of the premerger shareholders of Matragon (“the
Trusts”) shall sell 50% of their respective shares in and claims in Matragon in
terms of the proposed transaction and on completion of the proposed
transaction Prepaid will own and control 50% of Matragon with the remaining
50% being owned and controlled by the Trusts.
Rationale of the transaction
5. Prepaid considers that the transaction will enable it to gain access to the
Matragon group’s unique proprietary technology. The technology currently
used by Prepaid to make distributions in relation to airtime sales is outdated
and is not EMV complaint (EuropayMastercardVisa Complaint) as a result it
is not capable of accepting debit or credit cards. From Matragon’s perspective
the selling of the 50% of interest in the Matragon’s group to Prepaid is to
indirectly become parties to the server based switching (delivery) agreement
that the subsidiaries of Prepaid have with various institutions.
The merging parties activities
6. The primary activities of Prepaid Company firm are the selling and
distribution of voice telephony airtime (including postpaid contracts, physical
and electronic prepaid recharges and starter packs. Matragon through its
subsidiaries is involved in selling and distributing voice telephony airtime
(including postpaid contracts, physical and electronic prepaid recharges and
starter packs. Comm Express Services of South Africa (Pty) Ltd a wholly
owned subsidiary of Matragon is involved in airtime management services
which allows other firms to use its backoffice software to manage their airtime
sales.2
Relevant Market
7. The Commission defines the relevant market as the market for the
distribution of airtime sales more specifically the distribution of airtime sales to
distribution of airtime sales more specifically the distribution of airtime sales to
other intermediaries and Independent Service Providers in South Africa.
Competition Evaluation of the Merger
8. The Commission’s investigation revealed that the merging parties would
enjoy a combined post merger market share of 10.15% in the market for the
distribution of airtime sales.
2 A list of the activities of the merging parties can be found on pages 4 and 5 of the Commission’s
Report.
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9. Premerger Prepaid had 8.31% whilst Matragon has 1.84% of the identified
relevant market share. According to the Commission the merging parties will
compete with larger players such as Vodacom SP (42.15%) and MTN (27%).
Vertical overlap
10. There are also vertical aspects to the transaction as both parties sell
airtime to each other at various levels of the market. Prepaid sells airtime to
Comm Express, a wholly owned subsidiary of Matragon. According to the
Commission the sales constitute less than 1% of Matrgon’s turnover. Comm
Express also sells airtime to The Prepaid that constitute less than 1% of
Prepaid turnover. The parties are not dominant at any levels of the market.
According to the Commission the market is not characterised by any distinct
sales pattern with various players selling across the functional level.
Public interest
11. No public interests issues arise from the merger.
Conclusion
12. Based on the above the transaction will not result in a substantial
lessening or prevention of competition in the identified markets and is
accordingly approved unconditionally.
_______________ 09 May 2006
Y. Carrim Date
Concurring:D Lewis and N Manoim
For the merging parties: Paul Coetzer, Brink Cohen Le Roux
For the Commission : Geffrey Mudzanani, Mergers and Acquisitions
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