CLOSE AD
Advertisement
logoSections

Telkom’s legal avalanche

As Telkom considers its options with regard to the R449 million fine levied by the Competition Tribunal, it will also have to consider what to do about a second, and possibly stronger, case that is due to be heard by the tribunal next June.

The fine represents the culmination of an eight-year highly litigious battle between Telkom and the Competition Commission, which was fighting on behalf of value-added network service providers who alleged that Telkom had abused its dominance.

Photo: Simphiwe Mbokazi. Credit: Independent Newspapers

Yesterday Telkom issued a brief statement saying it was reviewing the judgment and “taking advice as to its options”.

In a statement issued late yesterday, Communications Minister Dina Pule noted that while the fine would have an impact on the finances of Telkom, “the matter has now been concluded”.

She added that she was “committed to working with Telkom to ensure that the company is revitalised and contributes to achieving socio economic benefits for the country”. “This will be done in a manner that ensures that Telkom pursues commercial imperatives that will guarantee its sustainability and viability going forward.”

The announcement of the fine, which is equivalent to 90c for every Telkom share, saw the share price recover from an early morning slump, to end the day 4.38 percent up at R18.84. Analysts said that the strengthening in the share price reflected relief that the tribunal had not followed the commission’s recommendation that a fine of R3.2 billion, equivalent to 10 percent of Telkom’s turnover, be levied.

Maqhawe Dlamini, the head of equities at the Public Investment Corporation, which has a 9.3 percent stake in Telkom, said that the tribunal’s ruling was positive for Telkom “as it is substantially lower than the R3bn-odd the market had priced in”.

He added: “Telkom believes that it should be less than R30 million, so an appeal is a possibility going forward.”

Although the fine was considerably lower than what was sought by the commission, competition commissioner Shan Ramburuth said he was happy with the outcome, which sent the right message to a dominant firm like Telkom.

“It is very unfortunate that it took so long, but I am pleased that we didn’t succumb to the litigation tactics pursued by Telkom,” he said.

With regard to the case that is due to be heard by the Competition Tribunal next June, Ramburuth said: “Our door is always open for negotiations towards a settlement.”

One institutional fund manager said the recovery in the share price was attributable to the removal of some of the uncertainty surrounding Telkom.

“Investment managers hate uncertainty; the uncertainty around the anti-competitive charges have been removed for now, but the real problem remains which is the uncertainty about Telkom’s leadership.”

The second case, which is due to be heard next June, deals with anti-competitive behaviour between 2004 and 2009. It is expected to be far tougher for South Africa’s ailing fixed-line telecoms provider.

One analyst noted that the Competition Commission had become more rigorous in the way that it prepared cases and was likely to present an even more compelling case the second time around.

The extremely damning ruling released by the tribunal yesterday made frequent references to Telkom’s “bullying”.

It also noted that even Telkom’s own management conceded that the comparatively small operators such as Omnilink and Didata, that offered value-added network services, “were more efficient and cheaper than Telkom and provided service level agreements to customers when Telkom didn’t”.

SHOW ALL
Advertisement
Twitter Olympics Feed