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Tribunal prepares for Telkom case


Johannesburg, 22 Jan 2010

The Competition Tribunal is preparing for a pre-hearing where Telkom will be required to present its case in a long-standing competition investigation.

The tribunal says all parties are now filing their official documents in lieu of a pre-hearing where the official date for the case against Telkom will be decided. Telkom has declined to comment on the matter; however, it is likely preparing its defence for the case.

The case stems from a complaint submitted by the then value-added network service providers to the Competition Commission, in 2002. In 2004, the commission ruled that Telkom should appear before the tribunal.

The providers accused the fixed-line operator of abusing its market dominance by refusing to supply them with backbone and access facilities, unless they met Telkom's conditions.

The VANS also complained that Telkom would not peer with AT&T, and refused facilities for AT&T to peer with satellite networks. The operator allegedly refused to lease access facilities to VANS directly and charged them more than Telkom's own customers.

Telkom disputed the matter, and used a legal loophole to dodge the jurisdiction of the Competition Commission, saying it should rather fall under the jurisdiction of the Independent Communications Authority of SA (ICASA).

Despite a tight memorandum of understanding between the Competition Commission and ICASA, telcos have consistently used this excuse to avoid prosecution on competition issues.

However, last year, the Supreme Court of Appeals made a landmark ruling that will see Telkom's case put before the Competition Tribunal. If Telkom is found guilty of anti-competitive behaviour, it could face the largest fine the telecoms industry has ever seen.

Before referring the case to the tribunal, the Competition Commission recommended the fixed-line operator be fined 10% of its annual turnover for the year ended 31 March 2009, which is the maximum the commission can recommend.

The commission has never recommended the maximum fine, and the largest ever handed out by the authorities was the R600 million fine steel producer Mittal was slapped with a few years ago.

With Telkom's revenue for that year sitting at R33.7 billion, Telkom's fine would be in the region of R3.37 billion - almost five times the amount paid by Mittal (5.5% of its turnover).

While it is unlikely that Telkom will actually be required to pay the full fine, the tribunal may use the opportunity to make a statement through its Telkom ruling. The case is expected to be heard next month; however, the tribunal says it cannot say exactly when it will get under way.

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