The Competition Commission has approved, with conditions, IHS Holdings’ acquisition of 5 713 passive tower infrastructure sites and the associated business operations owned by telecommunications group MTN South Africa (MTN SA).

The merger will result in the relevant towers becoming wholly owned by New York Stock Exchange-listed IHS Holdings subsidiary IHS Towers, which will, in turn, form a South African subsidiary, IHS Towers South Africa (IHS SA), to hold these tower assets.

“The transaction, which involves the sale of a part of MTN SA’s tower infrastructure, means after the merger the two companies will remain direct competitors in the passive tower infrastructure market as MTN SA will retain some of its tower infrastructure which is not part of the transaction,” the Competition Commission said on March 10.

With identified competition and public interest concerns arising from the transaction, specifically related to the exclusion of rival independent tower operators and vendors from the market, as well as the potential exclusion of rivals from access to space on the affected towers, the Commission imposed conditions to the sale.

“The Commission was particularly concerned about the ability of small, medium-sized and microenterprises (SMMEs) and historically disadvantaged persons (HDP) tower vendors and independent tower operators to effectively participate in and expand in the tower infrastructure market, particularly at a time when mobile operators are considering the technical and other imperatives of rolling out fifth-generation technology.”

One of the conditions imposed is that MTN SA will not retrench any of its employees in South Africa as a result of the merger for 24 months from the implementation date.

Further, within 18 months of the implementation date, IHS SA is required to achieve a minimum Level 4 broad-based black economic empowerment (BBBEE) status and a Level 1 BBBEE status within four years.

The company is also required to achieve 30% BBBEE ownership within 24 months.

Further particulars of the BBBEE condition are subject to a confidentiality claim made by the merging parties, which will be adjudicated by the Tribunal.

Meanwhile, IHS SA and MTN have committed to procuring a substantial proportion of the goods and services required for the construction of its tower sites, as well as the management, maintenance and security of tower sites, from SMME and HDP tower vendors in South Africa, either directly or indirectly.

This will be subject to IHS SA, MTN and the relevant tower vendors agreeing to commercial terms, including terms related to quality and service standards as well as competitive pricing.

For each contract awarded to SMME and HDP tower vendors in terms of the procurement condition, which will be in place for ten years, MTN SA and IHS SA shall provide preferential payment terms to support the working capital requirements of the vendors.

“The Commission also notes that there is a structural link between MTN SA and IHS SA. This raised a concern that IHS SA may be the preferred partner for new site rollouts.

“In order to limit any exclusionary effect associated with such a strategy, the Commission has imposed a condition limiting 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 for new site rollouts,” the Commission added.

In addition, MTN SA shall spend R60-million a year, for 10 years from the implementation date, to support SMME- and HDP-owned vendors in the telecommunications sector.

In relation to the sites that are to be acquired and transferred to IHS Towers as part of the merger, IHS Towers will continue to make electronic communications facilities available to all existing users on the same terms and conditions as are currently applicable in terms of the agreements between MTN SA and those users.

On the expiry of those agreements, in relation to both the towers infrastructure sites being acquired and any new sites constructed by the IHS Towers, IHS Towers will, on request, provide services, including, but not limited to, lease space on towers, to any party licensed in terms of the Electronic Communications Act, on fair, reasonable and non-discriminatory terms, provided that it is technically, commercially and legally feasible to do so and subject to performance by the third parties of their respective obligations under the applicable commercial agreements.

The site access conditions set out above will endure for as long as IHS Towers is a site owner in South Africa.