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Telkom fine a slap on the wrist

Aug 07 2012 13:10 Reuters

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Johannesburg – Telkom [JSE:TKG] had to be fined something to make it politically equitable and for the Competition Tribunal not to be seen as unfair, a telecoms analyst said on Tuesday.

Dobek Pater, a telecoms analyst at consultancy Africa Analysis, was reacting on news that the Competition Tribunal has slapped a lighter-than-expected fine of R449m on fixed-line operator Telkom for using its dominant market position to “bully” potential competitors.

The result is likely to be seen as a victory for Telkom. The competition watchdog, which first lodged the complaint in 2004, originally sought a fine of R3.5bn, which the struggling company has said would be “catastrophic” and jeopardise its business.

Pater said the R449m fine “is probably an optimal way out for all parties”.

The Competition Tribunal, which rules on anti-trust complaints, said Telkom exploited its position as South Africa’s dominant player in telecoms to block competition from other network service providers.

“Telkom impeded the growth of its competitors and retarded innovation in the market place,” the Tribunal said, adding that “Telkom bullied its downstream competitors into line”.

Shares of Telkom, which were down more than 3% before the release of the judgment, pared losses after and were down 1.3% at R17.81 at 12:58.

Stung by declining fixed-line usage and an expensive, failed attempt at expansion into Nigeria, Telkom has been struggling to craft a convincing turnaround plan.

South Korea’s KT Corp last year offered to buy 20% of Telkom in a deal that was eventually scuppered by South Africa’s government after KT cut back its offer price.

The government has also said companies trying to maximise profits could overlook the millions of poor lacking services. Rolling out broadband services is one of the ruling African National Congress’ stated goals.

The government is currently debating making Telkom a fully state-owned company once again.

South Africa’s government currently owns just under 40% of Telkom, while the state-run Public Investment Corporation holds just short of 11%.

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