IHS Global Insight Perspective | |
Significance | An eleventh-hour application was made on Friday (15 May) by the Congress of South African Trade Unions (COSATU) and the regulator to prevent the Vodacom transaction from going ahead, but this was dismissed by the High Court yesterday (17 May). |
Implications | The High Court previously dismissed a similar application by the Communication Workers Union (CWU) to halt the transaction. The heart of the objection, also raised by COSATU, is that there was not a sufficient consultation process regarding the sale of the stake in Vodacom. |
Outlook | The regulator decided in April 2009 that it did not need to give prior approval for the transaction, but while the urgent interdict was dismissed, the application made by COSATU to set aside ICASA's decision remains pending and will lead to further legal action. |
Fixed-line incumbent Telkom, which currently holds a 50% stake in Vodacom, is in the process of selling 15% of this stake to Vodafone for 22.5 billion rand (US$2.28 billion) and unbundling the remaining 35% stake to its own shareholders (see South Africa: 7 November 2008: Vodafone to Take Controlling 65% Stake in Vodacom). The complex transaction has been contingent on a number of conditions being met, including approval by 75% of Telkom's shareholders; approval from the South African competition authorities and ICASA; that Vodacom Group be listed on the JSE; and that Telkom de-merge the remaining 35% of Vodacom Group to its shareholders. All of these permissions and pre-requisites have been met, with ICASA notably giving approval to the transaction in April 2009, confirmed by ICASA in a statement on Friday (15 May).
However, an urgent, eleventh-hour application was submitted by the Congress of South African Trade Unions (COSATU) and ICASA on Friday to prevent the transaction from going ahead. The Communication Workers Union (CWU) had previously applied for a similar interdict, which was rejected in April 2009 (see South Africa: 1 May 2009: South African High Court Dismisses CWU Application to Halt Vodacom Sale). The heart of the CWU’s objection was that there was not a suitable consultation process regarding the transaction. Shortly afterwards, on 5 May, COSATU said it wanted to launch a legal review and filed court papers asking for ICASA's April decision to be set aside. In its statement on Friday, ICASA said that while it awaits the outcome of the court on the matter, it was concerned that the court proceedings will only commence long after the transaction had taken place and that after careful consideration it had therefore decided to rescind its previous decision.
Telkom issued a statement this morning (18 May), saying that “the North Gauteng High Court, Pretoria, dismissed the joint application by COSATU and ICASA for an order interdicting the parties from taking further steps to implement the Vodacom transaction”.
Outlook and Implications
Although the interdict has been dismissed, the application made by COSATU for ICASA to set aside its decision remains pending and will see further legal action. If the application made by COSATU is granted, a public consultation could go ahead, which would delay the remaining steps in the process. In a statement on Friday, ICASA said that “in the interest of transparency, the authority finds it appropriate that a public process be followed to allow all interested parties to be heard. The envisaged public hearings will take place by mid-June 2009”.
Telkom said in its statement this morning that it “will continue to act in accordance with its legal obligations under the transaction agreements and intends to implement the remaining steps of the transaction in accordance with the previously announced timetable", adding that “this application, which preceded the joint application by COSATU and ICASA, remains pending [and that] Telkom will oppose the application and will advise shareholders regarding developments in due course”.