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No need for more Telkom sanctions, says BCX

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 03 Aug 2015
BCX CEO Isaac Mophatlane says DiData's call for additional sanctions on the Telkom deal is disappointing.
BCX CEO Isaac Mophatlane says DiData's call for additional sanctions on the Telkom deal is disappointing.

IT services company Business Connexion (BCX) says there is no need for further sanctions to be placed on Telkom, as it has already been recommended the deal be approved with certain conditions.

Telkom is in a bid to buy BCX for R2.67 billion, a deal expected to give both companies an edge against competitors in the enterprise space.

However, it has been reported Dimension Data wants the Competition Tribunal to impose more sanctions on Telkom if its deal to buy out BCX is approved.

BCX CEO Isaac Mophatlane does not believe further sanctions are necessary: "The telecoms landscape has changed significantly since Telkom first made the move to acquire BCX in 2007. Today, consumers have far more choice, so Telkom is no longer the only dominant player - all this needs to be taken into account in the decision."

Africa Analysis MD Dobek Pater agrees and says DiData's call for more sanctions on the deal cannot be justified. "Telkom is in a very different position now than it was eight years ago.

"In terms of its IT services position, there are far stronger players in the market. In terms of telecoms (underlying infrastructure), from a wholesale perspective Telkom treats all market players on an equal basis, including its own retail division," he says.

Mophatlane explains the drop in voice traffic is affecting telco and mobile operators across the globe and is forcing them to revisit their operating models.

"The convergence of IT and telco is a natural progression and is happening worldwide and is not unique to the African continent. We need to ensure such deals are resolved efficiently for the South African IT industry to be able to compete and thrive," he notes.

Competition fears

According to Pater, DiData's request for more sanctions is a move to ensure it "weakens" the new stronger competitor once it emerges. "Dimension Data is one of the main competitors to BCX and may be one of the companies possibly most impacted by the Telkom/BCX deal in terms of competition."

Ovum analyst Richard Hurst says if more sanctions are imposed on Telkom, this may cause a delay in the process and stall the deal, but DiData is simply delaying the inevitable.

"The deal will probably shake-up the market, particularly in the wake of the Vodacom/Neotel acquisition. These are signs that the market is moving to a consolidation phase as competition has increased and profit margins have shrunk," he says.

"It simply serves to highlight the fact that Dimension Data has potentially more to lose and therefore just simply re-acting to a growing threat," Hurst notes.

Pater says if the tribunal decides to impose more sanctions on the deal, this could mean Telkom and BCX will not be as competitive in the short- to medium-term as they otherwise would have been.

"If the additional restrictions pertain to upstream input services, the impact may be very limited as Telkom is already constrained in terms of its functional wholesale and retail separation," says Pater.

BCX says the delays to the deal have had a huge impact on BCX. New competitors entering the market are taking market share and every time the deal is delayed it costs the company competitive advantage, says Mophatlane.

"For now, we continue to deliver value to our customers as well as continue to innovate around our products and services in order to ensure we stay ahead."

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