Will­ing to give and take

Sale of BCX Comms a con­sid­er­a­tion

Finweek English Edition - - Companies & markets - BELINDA AN­DER­SON

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

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