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Vodacom surprised at Competition Commission investigation

Cape Town - Vodacom on Wednesday said it was surprised by the news that the Competition Commission had started an investigation into it for "abuse of dominance".

The commission said the investigation came in the wake of the cell phone giant securing an "exclusive exclusive four-year agreement" with National Treasury to be the sole provider of mobile telecommunication services to the government.

After news of the investigation broke, the cell phone giant's share price dived by over 6% on the JSE, before recovering somewhat to trade at 3.5% down.  

The commission said the contract would entrench Vodacom’s dominant position in the market, raise barriers to entry and expansion, distort competition in the market, and result in a loss of market share for other network operators. 

In a statement Vodacom said it was aware of the investigation and was "committed to fully cooperating with the commission".  

"The tender process was initiated and controlled by National Treasury through its procurement officer with the award based on various elements including cost savings, quality of service, security, coverage, support and billing, quality of network and technology innovation,' it said.

"One of the key objectives of which was to reduce Government’s communication costs." 

Vodacom said it was confident that it followed due process in what it termed a "fiercely contested and transparent bidding process" and said it had consulted with the commission prior to the awarding of the contract. 

National Treasury did not immediately reply to a request for comment.

Exclusion 

The commission said that, before Vodacom entered into the agreement, all government departments could purchase mobile telecommunication services from "any mobile network operator".

"In March 2016, Treasury issued a tender for the supply and delivery of mobile communication services to national and provincial government departments for the period 15 September 2016 to 31 August 2020," it said.

"Vodacom was the preferred supplier after the other bidders were eliminated at different phases of the bidding process."   

"The Commission has reasonable grounds to suspect that the exclusive contract may constitute an exclusionary abuse of dominance by Vodacom in contravention of the Competition Act," it said.  

The act prohibits a dominant firm from abusing its dominance by requiring or inducing a supplier or customer to not deal with a competitor.

It also stops firms from engaging in "exclusionary acts" that impedes the entry of other firms into the market.

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