Willing to give and take
Sale of BCX Comms a consideration
TELKOM MIGHT BE willing to sell Business Connexion (BCX) subsidiary BCX Communications if it would help the Competition Tribunal provide a positive verdict on the deal. Corporate affairs chief Mandla Ngcobo says that although such a decision would need to be ratified by Telkom’s executive committee, it would be considered if it gave the tribunal the comfort necessary to close the deal.
In some cases before it – where the Competition Commission believes there were elements of a deal that could be restructured to limit any anti-competitive effects – it might recommend the transaction gets the go-ahead subject to those criteria.
However, the sale of BCX Communications was not a remedy proposed by the commission, which flatly recommended the tribunal turn down the deal. Telkom strongly believes it has a good case to argue before the tribunal, but has been bogged down by anti-monopolist sentiment.
Ngcobo says in principle that Telkom wasn’t asking to be allowed to do anything different from what international players such as BT had done in adding IT services to its offering, although he acknowledges that each market has its unique set of circumstances.
Telkom is under pressure to maintain and grow its fixed-line revenue streams in the face of the launch of additional services by Neotel and the introduction of new players, such as Infraco. Telkom acknowledges the need to think “creatively”. Ngcobo says Telkom had negotiated interconnect agreements with Neotel and agreed on terms for leasing lines.
Regulator Icasa also recently granted Neotel access to radio spectrum for its last mile (access to homes and offices). With impediments such as these out of the way, MD Ajay Pandey said recently it was on track to launch small business and consumer services by mid-year.
The Telkom/BCX hearings have been postponed until 18 May due to the hospitalisation of tribunal chairman David Lewis. Business Connexion shareholders must decide whether to agree to a further extension of the transaction. The hearings are scheduled to end on 1 June.
Ngcobo says Telkom was satisfied the tribunal had engaged its witnesses – Rikus Matthyser and Arnold van Huyssteen – on an intelligent level and hopefully with an open mind, although Matthyser in particular had faced vociferous questioning after his testimony.
When the hearings resume it will be the turn of BCX empowerment partner Gadlex’s witness, Setumo Mohapi.
Telkom has long said that if the BCX transaction doesn’t go ahead it could look at alternatives, including growing its IT services capacity organically or making a smaller acquisition. Ngcobo says Telkom could also look offshore for a suitable acquisition. However, BCX probably offers better value considering its price.
International acquisitions almost always mean diverting resources to the company bought and it isn’t preferable to see money flowing from SA.
Willing to negotiate. Mandla Ngcobo