Ethos Fund and Echotel

The judgment

The court's own file

wd competitiontribunal COMPETITION TRIBUNAL OF SOUTH AFRICA Case No: LM230Jan19 In the matter between Ethos Fund VII Primary Acquiring Firm And Echotel Proprietary Limited Primary Target Firm Panel :Y Carrim (Presiding Member) : M Mazwai (Tribunal Member) : 1 Valodia (Tribunal Member) Heard on : 06 February 2019 Order Issued on : 06 February 2019 Reasons Issued on : 18 February 2019 REASONS FOR DECISION Approval {1] On 06 February 2019, the Tribunal unconditionally approved a transaction in terms of which Ethos Fund VII ("Ethos") acquired joint control of Echotel (Pty) Ltd (“Echotel”).

[2]The reasons for the approval follow. Parties to the transaction Primary Acquiring Firm (3)

[4]Ethos is a private equity investment fund comprising various local and foreign investors. Ethos is controlled by Ethos (Pty) Ltd (“Ethos Management”), which acts as its discretionary fund manager. In addition to Ethos Fund VII, Ethos Management is a discretionary manager to Ethos Fund V, Ethos Private Equity Fund VI, and Ethos Technology Fund. Ethos and its controller will collectively be referred to as the ‘acquiring group’. Ethos invests in medium to large companies in multiple industries in sub- Saharan Africa, with the intent of controlling and participating in the active management of such acquisitions. Primary Target Firm (5)

[6]The primary target firm is Echotel trading as Echo SP. Pre-transaction, Echotel was jointly controlled by Ethos Mid-Market Fund | (“EMMF”), Diplonamix Investments (Pty) Ltd (‘Diplonamix’), Anthony Richard Southgate (‘Southgate’), and Grant Wayne Thom (‘Thom’). Echotel provides ISP services via a multi-carrier converged network. Echotel is an independent aggregator of communication and cloud computing services. Proposed transaction and rationale 7 In terms of the transaction, Ethos will acquire 33.7% of the issued share capital of Echotel resulting in Ethos being the largest shareholder of Echotel. Post- transaction, Ethos will enjoy joint control over Echotel, with EMMF and * Echotel provides internet services to the South African market as an internet transit provider, routing traffic from one ISP's network to another. Echotel's offerings include VPN, VoIP, hosting, security and hardware services. 2 18] Diplonamix exercising minority protections by way of vetoes over key company resolutions.? In termsof rationale, Ethos submitted that Echotel holds a strong position within a high growth market and this transaction is congruent with its investment strategy. Echotel submitted that it sought to undertake acquisitions throughout Africa and required the arrangement with Ethos to be adequately financially capacitated. Relevant market and impact on competition (9)

[10]The Commission considered the activities of the parties and found that the transaction does not result in any horizontal overlaps as no firm within the acquiring group holds an interest in a business conducting activities that are ‘substitutable or competing with that of the target firm. The Commission found that the proposed transaction would not give rise to any vertical overlaps as there is no pre-existing business relationship between the parties. Public interest m1)The parties to the transaction confirmed that the transaction would not have any adverse effects on employment. The transaction raises no other public interest concerns.> 2 Transcript page 4, line 4. 2 Ethos Management submitted that it will not integrate the operations of Echotel into any of its existing portfolio companies, and Echotel will continue to be operated on a stand-alone basis post-merger. ‘Therefore, the transaction would not result in any duplication of roles within the acquiring group. 3 Conclusion

[12]In light of the above, we concluded that the transaction is unlikely to substantially prevent or lessen competition in any relevant market. In addition, no adverse public interest issues arise from the transaction. Accordingly, we unconditionally approved the transaction. 18 February 2019 Ms. Yasmin Carrim Date Ms. Mondo Mazwai and Prof. Imraan Valodia concurring. Tribunal Case Manager : Andiswa Nyathi For the Merging Parties : Robert Wilson ofWebber Wentzel For the Commission : Yolanda Okharedia and Wiri Gumbie