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[2014] ZACT 7
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Prepaid Company (Pty) Ltd v Retail Mobile Credit Specialists (Pty) Ltd (018416) [2014] ZACT 7; [2014] 1 CPLR 147 (CT) (9 April 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 018416
In the matter
between:
THE
PREPAID COMPANY (PTY)
LTD
..................................................................
Primary
Acquiring Firm
And
RETAIL
MOBILE CREDIT SPECIALISTS (PTY)
LTD
.............................................
Primary
Target Firm
Panel: Mondo Mazwai
(Presiding Member)
: Medi Mokuena
(Tribunal Member)
: Andiswa Ndoni
(Tribunal Member)
Heard on: 12 March
2014
Order Issued on: 12
March 2014
Reasons Issued on: 9
April 2014
Reasons for
Decision
Approval
[1]
On 12 March 2014, the Competition Tribunal
("the
Tribunal")
unconditionally
approved an acquisition by The Prepaid Company (Pty) Ltd of 100% of
the shares in Retail Mobile Credit Specialists
(Pty) Ltd.
[2] The reasons for
approving the proposed transaction follow.
Parties to
transaction
[3]
The primary acquiring firm is The Prepaid Company (Pty) Ltd
(“TPC”).
TPC
is controlled by Blue Label Telecoms Limited
(“BLT”),
a
company listed on the Johannesburg Securities Exchange and thus is
not controlled by any single shareholder,
[4] BLT has three
subsidiaries which are relevant to this proposed transaction
(collectively "the acquiring group"):
•
TPC
(the primary acquiring firm in this transaction)
•
The
Post Paid Company (Pty Ltd
•
Blue
Label Distribution (Pty) Ltd
[5]
The primary target firm is Retail Mobile Credit Specialists
(“RMCS”),
a
private company with several individual shareholders. According to
the Commission, none of the shareholders controls RMCS for
competition law purposes.
Proposed
Transaction and Rationale
[6] TPC will acquire
100% of the issued share capital of RMCS. Post-merger RMCS will be a
wholly owned subsidiary of TPC.
[7] According to the
merging parties, the transaction will enable them to expand their
product offerings and customer base.
Relevant Market
and Impact on Competition
[8]
The merging parties are both active in the market for the
distribution and supply of airtime. The acquiring group, through TPC,
inter
alia,
distributes
cellular starter packs that are either preloaded with airtime or not,
to major retailers, wholesalers and independents.
It also offers
cellular telephony solutions and value-added services to major
retailers and small merchants. Through the Post-Paid
Company, the
acquiring group also distributes postpaid cellular offerings
1
to customers of existing retailers such as Edcon who have been
pre-vetted/registered by the retailers.
[9] RMCS focuses on
the distribution and supply of discounted post-paid airtime contracts
from all network operators and value added
services. RMCS supplies to
small merchants but the majority of its customers are end-users who
are reached via retailers.
[10] As indicated,
the merging parties' activities overlap in the distribution and
supply of airtime, and more specifically in the
distribution and
supply of postpaid airtime. According to the Commission nothing turns
on whether the product market is delineated
broadly as the market for
the supply of airtime or further segmented to distinguish between
pre-paid, post-paid, subscription or
starter packs as the proposed
transaction is unlikely to substantially prevent or lessen
competition on either definition of the
market.
[11] BLT and RMCS
both distribute airtime throughout South Africa. The relevant
geographic market is therefore national.
[12] According to
the merging parties, the largest participants in the market for the
distribution of airtime nationally (including
pre-paid, post-paid,
subscription, starter packs, fixed line and mobile) are:
Table 1:
Estimated Market Shares for the distribution of airtime nationally:
Competitors
Estimated Market Share
Vodacom Service Provider
15-25%
MTN Service Provider
10-20%
Telkom
0-10%
Cell C Service Provider
5-10%
Altech Autopage
15-20%
Nashua Mobile
15-20%
BLT
10-20%
RMCS
0-10%
Source:
Merging parties' estimates
[13] According to
the merging parties, the proposed transaction will result in a market
share accretion of between 1-10% in relation
to the national market
for the distribution of airtime. The acquiring group will have a
post-merger market share of between 10-20%.
[14] Assuming a
narrower market for the distribution of post-paid airtime, the
merging parties' estimate market shares are as follows:
Table 2:
Estimated Market Shares for the distribution of post-paid airtime
nationally:
Competitors
Estimated
Market Share
Vodacom
Service Provider
33-43%
MTN
Service Provider
25-35%
Cell
C Service Provider
5-15%
Altech
Autopage
0-10%
Nashua
Mobile
2-13%
BLT
0-10%
RMCS
0-10%
[16]
The Commission found that the market was dominated by large mobile
network operators who distribute airtime at each level of
the supply
chain
2
.
In addition to distributing airtime through their own Operator-owned
Service Providers (the so-called "OSP's"), the
network
operators also distribute airtime through Independent Service
Providers (the so-called "ISP’s" e.g. Autopage
and
Nashua) as well as through intermediaries/distributors e.g. TPC,
RMCS, Glocell, Smart Call; and through retailers. The Commission
concluded that it was unlikely that the merged entity would be able
to exercise market power (if any) given the large presence
of the
network operators as well as other distributors such as Nashua,
Autopage, iTalk and numerous intermediaries.
Public Interest
[17] The Commission
found no public interest issues arising out of the proposed
transaction.
Conclusion
[18] In light of the
above we conclude that the proposed transaction is unlikely to
substantially prevent or lessen competition
in the relevant market.
In addition, no public interest issues arise from the proposed
transaction. Accordingly we approve the
transaction unconditionally.
9 April 2014
DATE
MOND&
MAZWAI
Medi
Mokuena and Andiswa Ndoni concurring
Tribunal
Researcher:Moleboheng Moleko
For the merging
parties: Lee Mendelsohn, Kirsty van den Bergh and Michael
Mbikiwa - Edward
Nathan Sonnenberg’s Incorporated
For the Commission:
Nompucuko Nontombana
1
More
specifically, the Post Paid Company sells so-called "hybrid"
cellular contracts, which are fixed term 12 or 24 month
agreements in
terms of which the user is required to pay a set monthly fee which
entitles the user to a set amount of pre-loaded
airtime every month.
Should the pre-loaded airtime be used up before month end, then the
user may top up on a pre-paid basis. According
to the Commission, the
industry does not distinguish between hybrid and other post-paid
offerings.
2
The
Commission relied on estimated market shares at the network operator
level rather than the distribution level which is more
appropriate.
This however does not affect the overall conclusions regarding the
competitive effects of this merger.