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Telkom charges stack up, firm says not guilty
October 30, 2009
 By Ann Crotty
Telkom believes it is "not guilty of the allegations" made against it by the Competition Commission. It said yesterday that the commission's authorities did not have jurisdiction on telecoms pricing.
"We are going to challenge the commission's jurisdiction, as we believe the Independent Communications Authority of SA is our regulator and the appropriate authority on pricing issues in this industry" said Anthony Klopper, the group executive of legal services at Telkom.
Klopper was responding to the commission's announcement that it had referred its findings of abuse of dominance against Telkom to the Competition Tribunal, and had asked the tribunal to levy an administrative penalty of 10 percent on Telkom's annual turnover for the year to March.
Klopper said the issue of jurisdiction was significantly complicated by all the changes to competition legislation and telecoms legislation that had been introduced since 2005 to 2007, the period of the alleged abusive conduct.
He referred to a case that involves the commission and Telkom, scheduled to be heard by the Supreme Court of Appeal (SCA) on Monday. The case stems from similar allegations originally made by the South African Vans Association. In that matter Telkom went to the High Court and challenged the commission's action on fronts including its jurisdiction. Last year the High Court ruled in Telkom's favour, but made no finding on jurisdiction. The commission appealed the court decision to the SCA, which will hear the case on Monday.
Nandi Mokoena, the manager of strategy and stakeholder relations at the commission, said yesterday that the regulator was confident of the SCA ruling in its favour. Mokeona confirmed that the commission was targeting Telkom's total turnover, although the allegations related only to the provision of basic infrastructure for internet services and virtual private networks, representing a small part of the total turnover.
"The situation is serious; there is more than one complaint and cases have been going on for long," said Mokoena. But Klopper countered that whatever the outcome of the jurisdictional dispute, which would be influenced by the SCA's ruling, any administrative penalty levied on Telkom would be considerably smaller than the R3.5 billion figure mentioned. "The affected turnover represents a tiny proportion of our total turnover."
In a note issued yesterday by Macquarie Securities, Martin Dullart said the outcome of the matter was by no means clear. "The timeline for resolution depends on whether Telkom settles the matter or opposes it. We expect Telkom to oppose, with the commission's jurisdiction over the telecoms industry a clear point of contention."
Dullart said a fine in the region of R3.4bn would be the "worst-case outcome". Telkom did not disclose internet service provider (ISP) revenues, but noted: "FY09 leased line and other data revenues comprised R7.5bn, with ISP revenues likely to be a fraction of that."
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