Telkom stays true to its nature

ADSL South Africa (Broadband South Africa), 14 March 2007

Telkom’s reasons for the proposed acquisition of Business Connexion (BCX) at The Competition Tribunal hearings left no doubt that Telkom has decided to stay true to its nature.

At the Competition Tribunal hearings into the BCX matter that started on Monday, Telkom has so far shown in its statements that it’s incapable of logical reasoning or is at the very least hoping that they might convince someone with half a brain, that their proposed acquisition of BCX ‘…is in the best interests of all parties and will benefit the ICT industry’ (Telkom claims BCX deal in best interest of all parties, MyADSL, 12 March 2007). Their statements are not only an insult to other parties in the industry but also to sanity and decency in this country.

Telkom’s Chief of Corporate Affairs, Mandla Ngcobo, aids Telkom in its insanity by stating during the hearings: “Our proposed acquisition of BCX is a natural and necessary step in the process of growth and competition. We will continue to seek new ways to serve the needs of the ICT industry” (Telkom claims BCX deal in best interest of all parties, MyADSL, 12 March 2007). Ngcobo added ‘…that the proposed impact of the merger will not lead to anti-competitive practices with regard to pricing, network access or quality of service’ (Telkom claims BCX deal in best interest of all parties, MyADSL, 12 March 2007). He also said: “The proposed merger is not only in the interests of our customers and shareholders, but it is also in the national interest” (Telkom claims BCX deal in best interest of all parties, MyADSL, 12 March 2007).

Statements like the above don’t deserve any commentary but for the sake of clarity we shall respond…

Of course the acquisition of BCX will be ‘…a natural and necessary step in the process of growth and competition…’ for Telkom because deceit and all of its half brothers and sisters define Telkom’s whole nature.

How can Telkom’s proposed acquisition of BCX ever be beneficial to our ‘national interest’?

Well, let’s look at some of the arguments made against the proposed acquisition of BCX by Telkom, arguments made by concerned parties such as Dimension Data (Didata) and the Internet Service Provider’s Association (ISPA).

‘Parties opposing the deal urged the tribunal to prohibit the takeover on the grounds that it would entrench Telkom's dominance and provide it with even greater opportunities to suppress competition in the telecommunications market’ (Telkom aims to bypass Icasa, tribunal hears, MyADSL, 13 March 2007).

In other words, according to parties opposing the deal it will only help to strengthen Telkom’s ‘caring hand’.

Points of importance:

• Telkom aims to outflank ICASA - Owen Rogers, who leads the legal team of the competition commission, ‘…referred to Telkom's strategy documents, which described how it would be advantageous to have Business Connexion as a separate entity and not subject to the accounting and costing regulations required by the regulator, the Independent Communications Authority of SA (Icasa)’ (Telkom aims to bypass Icasa, tribunal hears, MyADSL, 13 March 2007).
  
  Rogers also stressed the fact that according to Telkom’s strategy documents, BCX would as a separate entity, "not come under the close scrutiny of the competition authorities and this would allow it more room for the bundling of products and services" (Telkom aims to bypass Icasa, tribunal hears, MyADSL, 13 March 2007).
  
  In other words, purchasing BCX will enable Telkom to outflank ICASA by keeping BCX as a separate entity, which mean that room will be left for Telkom to suppress competitors without having to face the competition authorities.
  PLUS
  
  Alfred Cockrell, ISPA’s Counsel, made it clear that ‘…Telkom had managed to suppress consideration of a complaint, referred to the competition authorities more than three years ago, by challenging the authorities' jurisdiction in the high court’ (Telkom aims to bypass Icasa, tribunal hears, MyADSL, 13 March 2007). Also according to Cockrell ‘…the deal would remove a potential competitor and would enable the merged entity to offer bundled services, with potentially catastrophic consequences’ (Telkom aims to bypass Icasa, tribunal hears, MyADSL, 13 March 2007).
  
  In other words, Telkom’s history is proof of the fact that they’re hard pressed to outflank the competition authorities. This in itself must send out clear warnings because this means they don’t really care about ‘potentially catastrophic consequences’ the purchase of BCX might have.

• Quality degradation  – Rogers made it clear that the acquisition would inspire Telkom to engage "an insidious strategy of quality degradation of its competitors' products through a process that was more subtle than sabotage" (Telkom aims to bypass Icasa, tribunal hears, MyADSL, 13 March 2007). According to Rogers it would be a strategy where Telkom encourages “…the perception that things were less likely to go wrong and likely to be faster with Telkom" compared to its competitors (Telkom aims to bypass Icasa, tribunal hears, MyADSL, 13 March 2007).
  
  In other words, a strategy that’s designed to be subtle in deceiving the masses while in truth it’s actually damaging to our national interest.

• Local telecoms costs – ISPA’s lawyers didn’t fail to mention the fact that research has highlighted ‘…the extent to which Telkom's monopoly status had added to local telecoms costs’ (Telkom aims to bypass Icasa, tribunal hears, MyADSL, 13 March 2007).
  
  In other words, as a monopoly Telkom has already done a lot of harm and the acquisition of BCX will rather strengthen than diminish their monopolistic powers.

• No efficiency gains – ‘Dimension Data's legal team argued that the merger would result in substantial prevention or reduction of competition, with no efficiency gains to offset this’ (Telkom aims to bypass Icasa, tribunal hears, MyADSL, 13 March 2007).
  
  In other words, if the deal goes ahead we shall see the strengthening of Telkom’s ‘caring hand’ at the cost of healthy competition because there would be no efficiency gains to make up for this.

Any thinking person can see that Telkom has no need of more power and that the acquisition of BCX will only serve to further strengthen their power base. Telkom has beyond reasonable doubt shown that they can’t be trust with power. The fact that they have the audacity to even mention the acquisition of BCX is proof that they already have enough power to abuse.

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