South Africa considering M&A reforms as it seeks 5G investment

South Africa's anti-trust regulator is in private talks with the telecoms industry about relaxing competition rules, signaling that regulators in Africa's biggest economy may be willing to make changes that could lead to a wave of mergers and acquisitions in the sector.

The discussions, confirmed to Semaphore by the Competition Commission, are a direct response to calls for looser regulations from the industry led by MTN Group, Africa's largest mobile operator, which argues that existing rules, written for cheaper voice calls, risk leaving the country behind as operators around the world band together to finance 5G and AI.

Speaking to Semaphore this week, Ralph Mupita, currently chairman of global mobile industry body GSMA, gave examples of China, India and this WeWhile a handful of major players have worked extensively to roll out 5G and fiber nationwide, South Africa should consider similar integration to attract the investment needed for 5G, 6G and AI.

“This is what we are having conversations with regulators and policymakers about, so South Africa can avoid underinvestment from Europe,” Mupita said. merger Rules that slow down expansion. The European Commission is redrafting merger rules And the goal is to publish the proposal in April.

If the regulator acts on Mupita's petition, it would put Telkom, which is partly owned by the government, on a potential merger and acquisition spree that is likely to follow the reforms. The South African competition framework was one of the biggest obstacles to MTN's pursuit of its third-largest network, Telkom, which also runs the largest fiber optic network in Africa's largest economy.

Although Mupita is prioritizing Nigeria and Ghana for higher profits, he said he would pursue South African acquisitions if they remained attractive in the “medium to long term” – comments that put Telkom in the headlines. Serious talks between the two fail in 2022 over regulatory concerns The idea has resurfaced Because MTN wants to expand its fiber infrastructure.

South Africa is a medium-sized telecommunications market – approximately 60–65 million people supporting five national mobile network operators on paper, including Incumbent, MTN and Vodacom. Those numbers show the market to be crowded, but market power is heavily concentrated in two incumbents, and the rest lack the balance sheets to underpin a nationwide 5G and fiber rollout.

Last year, the Competition Commission blocked a deal that would have pulled fiber resources from Vodacom and another domestic player, giving vocal activists like Mupita a prime example of how regulators are focusing on the theoretical harms of competition while ignoring billions in promised investment. Although the Commission took a U-turn After the parties sweetened the deal, the episode underlined that the consequences of mergers could tie companies to social taxes that could undermine their business capabilities.

Mupita said South Africa's competition system is built on the view that more operators automatically leads to better outcomes for consumers, an argument that made sense in the early mobile era.

But once the industry moves deeper into the data age, and now into the AI ​​field, it requires larger, long-term investments and patient capital.

Mupita's push for a looser, investment-friendly regulatory regime echoes broader changes in global telecommunications. European operators from Vodafone to Orange and Deutsche Telekom have spent years warning of Strict competition rules and fragmented markets Europe has lagged behind America and Asia in terms of 5G investment.

However, the position has changed from 2024 onwards following a report by former ECB President Mario Draghi to the European Commission, which argued that Europe's economy is being pushed back By old competition rules.

In the age of 5G, fiber and AI, scale matters more than headcount. South African regulators should take note. Vodacom and MTN are spending more on network infrastructure, a market that looks competitive on paper but in practice risks underinvestment and poor coverage.

Regulators that block mergers in the name of continued choice could result in slower networks and higher operating costs. This agreement matters for jobs, connectivity and the digital competitiveness of the country. South Africa could replicate Europe's decade-long missed upgrade or adapt its rules to the realities of modern telecommunications. This is a policy choice, not fate.

Although the Commission agreed to the Vodacom deal to transfer its fiber assets to Massive, which is owned by South Africa's richest man, Johan Rupert, it fundamentally sees South Africa's economy as already dominated by a few big players.

In practice, this means that the Commission is wary of large mergers, Unless they are combined with social taxes – Protecting jobs, expanding network coverage in poor areas and ensuring benefits to the black majority.