Ann Crotty

Telkom’s financial position was “dire” at present and the payment of the Competition Tribunal’s R449 million fine could threaten the company’s ability to proceed with its planned roll-out of broadband facilities across the country, Andrew Barendse, the group executive of regulatory affairs at Telkom, told Business Report yesterday.

Barendse, who steadfastly maintains that Telkom did not infringe the Competition Act, queried whether payment of the fine would “be the best thing for the company going forward”, adding: “Is this even going to be good for the country going forward?”

He raised the prospect of behavioural remedies being imposed on Telkom, which might include tariff relief for some of its customers.

Barendse said it was important to consider the context of the charges against Telkom and the fact that they related to the period between 1999 and 2004. “What the world looked like then and what it looks like now are completely different,” he said. Telkom is facing a second competition case relating to the period from 2004.

Barendse said: “If the approach is ‘let’s take this bully down’ just to make a point, then the fine that will be paid will just go to the fiscus” and Telkom’s broadband roll-out would be threatened.

He added that Telkom believed it was best placed to “assist the country with the broadband imperative”.

Barendse and his colleague, George Candiote, the executive of legal services at Telkom, pointed out that payment of a fine was just one remedy to address contraventions of the Competition Act and suggested that “alternative remedies” should be considered. The comments from Telkom’s legal team come just days before the company is due to file a record of its appeal of the tribunal’s fine.

In its notice of appeal, Telkom argued that the tribunal had committed various errors of law and had interpreted evidence incorrectly. Telkom contends that a more appropriate fine would be R6.8m.

Competition lawyers expressed surprise at Telkom’s suggestion that alternative remedies be considered. “They would have avoided a fine of this size, if they had made a move to discuss the issues with the commission a long time ago. Instead they were exceedingly litigious and dragged the matter on for years and years,” one competition lawyer said.

“It was run entirely by Telkom’s legal team, at no stage did anyone from the chief executive’s office ever make an appearance at the tribunal. There was absolutely no willingness to reach a settlement.”

And Telkom’s comments come just days after the release of the results for the six months to September revealed an 80.6 percent drop in headline earnings a share to 37.2c, largely because of the provision for the R449m, which was treated as an operating expense by Telkom.

Yesterday analysts said that given the nature of this so-called operating expense, it would have been appropriate for Telkom to disclose a core earnings figure, which would have made some adjustment for payment of the fine over a two-year period.

One analyst estimated that such an adjustment would have revealed core earnings a share of R1.11 for the six months to September. Business Watch, page 2