Telkom under fire

ADSL South Africa (Broadband South Africa), 27 November 2006

A R2bn+ bill and the Competition Commission’s decision to block Telkom’s bid to buy Business Connexion (BCX) are sure signs that Telkom is coming under fire from more and more players.

A ‘canon ball’ landed in Telkom’s quarters when the Supreme Court of Appeal (SCA) ruled against Telkom at the end of a five year legal battle between Telkom and Telcordia. The management of US-based computer software supplier, Telcordia Technologies, must be smiling after their resolve paid off. According to Lennard Cowan, Telcordia’s lawyer, the settlement amount can amass to about R2.5 billion, legal costs included.

Will Telkom be left crippled after this ‘canon ball’ smashed through their defences?

Telkom will not be left crippled although the amount “represent more than 20 percent of this financial year’s annual profit of R9.3 billion” (Telkom faces R2bn bill after lawsuit, 2006). At best the dent in Telkom’s armor mean that Neotel ’s chances of facing Telkom successfully in the telecoms arena increased with a notch or two.

It is clear that both Telkom and IT group Business Connexion have no love left for the Competition Commission after it wrecked Telkom’s attempt to buy Business Connexion out. According to Benjamin Mophatlane, Deputy CEO of BCX, the process has been very disruptive to their business because of the time it took the Competition Commission to reach a final decision.

ADSL South Africa’s opinion on the matter is that they should stop whining. We’re always happy when a protective body such as the Competition Commission is actually doing its job. Come on Mr. Mophatlane, you really thought that such a decision would be taken overnight? Don’t expect any sympathy from hundreds of fed up ADSL users and others. If BCX manages to ‘jump in bed’ with Telkom it will result in “a substantial preventing or lessening of competition” (Competition Commission). The Competition Commission also hammered on the fact that Telkom has the “ability and incentive to engage in strategies to remove competitors and competition.” In other words, they would have the opportunity to ‘rob us blind’ if the Competition Commission didn’t step in. Not that Telkom needs any encouragement to make use of such opportunities.

Telkom especially must have the knife out for the Competition Commission because “Business Connexion was a key part of Telkom’s strategy to boost its non-voice income” (Will R2bn legal claim take the wind out of Telkom’s sales, 2006). In other words, Telkom will actually have to do some hard work to ‘earn a living’ in this exciting market. This will remain true while Business Connexion is out of Telkom’s reach (at least for now).

Another reason why Telkom must have the knife out for the Competition Commission is because the body stepped out in defence of small businesses.

A small business no longer need to make “use of the more expensive digital subscriber line (DSL) service as opposed to cheaper options used by home subscribers” (Cape small businesses win broadband battle, 2006). This means savings of R438 per month or R5 256 per year per business that’s making use of Telkom’s service. We don’t know any small business owner that wouldn’t welcome this.

Although the battle is not won yet, we’re at least one step closer to cheaper ADSL in South Africa. It is good to see the Competition Commission is showing some muscle.