Net1 Applied Technologies And DNI-4PL Contracts

The judgment

The court's own file

wd competitiontribunal COMPETITION TRIBUNAL OF SOUTH AFRICA Case No: LM018Apr18 In the matter between: NET1 APPLIED TECHNOLOGIES SOUTH AFRICA (PTY) Primary Acquiring Firm LTD and DNI-4PL CONTRACTS (PTY) LTD Primary Target Firm Panel : Norman Manoim (Presiding Member) + Andiswa Ndoni (Tribunal Member) : Fiona Tregenna (Tribunal Member) Heard on 220 June 2018 Order Issued on :20 June 2018 Reasons Issued on 234 July 2018 Reasons for De Approval

[1]On 20 June 2018, the Competition Tribunal (“Tribunal”) approved the proposed transaction involving Nett Applied Technologies South Africa (Pty) Ltd and DNI-4PL Contracts (Pty) Ltd.

[2]The reasons for approving the proposed transaction follow. Parties to proposed transaction Primary acquiring firm

[3]The primary acquiring firm is Nett Applied Technologies South Aftica (Pty) Lid (‘Net 1”), a private company incorporated in accordance with the company laws of South Aftica. Neti is a wholly-owned by Nett UEPS Technologies, Inc. ("Net1 Technologies"), a US company listed on the NASDAQ and is not controlled by any firm.

[4]Nett controls numerous firms in South Aftica namely, Cash Paymaster (Pty) Lid, Cash Paymaster (KwaZulu-Natal) (Pty) Ltd and Cash Paymaster (Northern Province) (Pty) Ltd,*

[5]_ Nett is a provider of payment solutions, transaction processing services and financial technology. Net1’s technologies are used in electronic commerce transactions which include the sale and distribution of airtime and the sale of airtime to Nett merchant network’, which in turn sells the airtime to end user consumer. Primary target firm

[6]The primary target firm is DNI-4PL Contracts (Pty) Ltd, a private company incorporated in accordance with the laws of the Republic of South Africa.

[7]The shares in DNI are held by AJD Holdings (Pty) Ltd, Rickmark Holdings (Pty) Ltd and Nett. DNI is engaged in retail communication and distributions to the informal market throughout South Africa. Its retail communications and distribution services includes the sale and distribution of prepaid airtime and starter packs.? Proposed transaction and rationale

[8]The proposed transaction involves a share subscription resulting in Net! increasing its shareholding in DNL-4PL from 49% to 55%.*

[9]The acquiring firm Net1 submits that the its investment in DNI will allow it to further address the need of un-banked or under-banked population by integrating mobile telephony service offerings with payment, product, distribution and hardware services. DNI submits that from its perspective, the proposed transaction will provide its existing shareholders with the opportunity to further realise the value of their investment in DNI. ' Furthermore Net! has non-controlling interest in Walledoc (Pty) Ltd and Finbond Group (Pty) Ltd. 2 Netl merchant network include EasyPay (Pty) Ltd, RMT Systems (Pty) Ltd, Manje Mobile Electronic Payment Services (Pty) Ltd. > DNI conducts its operations through, DNI Retail (Pty) Ltd, The Starter Pack Company (Pty) Lid, M4Jam (Pty) Ltd, Specpack Field Services (Pty) Ltd, Intemational Tower Corporation (Pty) Ltd and M4Jam South Africa (Pry) Ltd “The remaining shares will be held by AJD and Rickmark, Impact on competition

[10]The merging parties submitted that the provision of airtime services can be further segmented into a market for the sale of airtime and the distribution of starter packs, which are pre-loaded with airtime. Although DNI is involved in both segments it is primarily a distributor of starter packs. Net1 is also involved in the sale of airtime, but has less than 0.5 % of the market. The overlaps are thus not significant.

[11]The major competitor in the sale of airtime apart from the networks themselves, is Blue Label. Blue Label and Net 1 have various business relationships which we sought clarity on at the hearingS

[12]_ Firstly, we were advised that Net 1 is a customer of Blue Label and does not regard itself as a competitor.

[13]Secondly, Blue Label and Net 1 are both shareholders in Cell C. We raised with the merging parties whether this could provide an opportunity for information exchange in respect of the airtime sales market between DNI (now post-merger controlled by Net 1) and Blue Label. The merging parties informed us that the information exchanged on the Cell C board does not deal at any granular level with airtime distribution market. This makes concerns about exchange of competitively sensitive information unlikely.

[14]We are satisfied with these explanations that the merger raises no competition concerns. Public interest

[15]The proposed transaction will not give rise to any public interest concems.

[16]Furthermore, the proposed transaction raises no other public interest concerns. Conclusion

[17]In light of the above, we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. In addition, no $ The Commission took into account that competition in airtime sales also comes from sales by the major networks as well as other independents such as Glocell and Shoprite. © The proposed transaction will not resultin any job losses or retrenchment public interest issues arise from the proposed transaction. Accordingly, we approve the proposed transaction unconditionally. Bt July 2018 DATE iswa Ndoni and Prof Fiona Tregenna concurring Tribunal Case Manager: —_Busisiwe Masina For the merging parties: Ms Lara Granville of Cliffe Dekker Hofmeyr For the Commission: Mr Thabelo Masethulela and Nonhlanhla Msiza