By refusing to sell telecommunications circuits to Dimension Data’s virtual private network (VPN) provider OmniLink, Telkom hindered a planned merger between OmniLink and its Didata stable mate Internet Solutions (IS), the Competition Tribunal heard on Wednesday.

The tribunal is hearing complaints from industry players who felt the brunt of alleged anticompetitive behaviour by Telkom early last decade. The complaints have been referred to the tribunal by the Competition Commission, which is seeking a fine against the operator amounting to 10% of its 2003 annual revenues, or about R3,5bn.

IS chief operating officer Tony Walt told the tribunal hearings that the company had wanted to merge with OmniLink but was relucant to go ahead because it feared Telkom would restrict its ability to operate.

Walt said that at the time IS was dependent on Telkom for various telecoms links, including Diginet lines and access to other circuits. He said IS had no choice but to deal with Telkom as it was the sole entity able to provide those links.

He said Telkom hindered the planned merger between IS and OmniLink because IS “couldn’t go into the guts of both organisations to the extent we wanted to in order to merge them”.

“We were forced to run duplicated infrastructure that limited our abilities to create the economies of scale we should have been able to achieve by bringing these structures together.”

As OmniLink grew, Telkom refused to provide services that the company required to increase the capacity on its network, Walt told the tribunal. “They didn’t switch the existing network off, but wouldn’t provision further services.”

He explained that bandwidth demand was growing by between 40% and 60% a year, so even if the client base had remained the same, their requirements would have increased. “This meant OmniLink couldn’t continue to meet its customers’ demands.”

Walt said the result was that long-standing clients had to be told they could no longer be supported. “We had to make plans, take traffic off our networks, and run inefficient alternative solutions just so that we could cater for our customers’ requirements.”

He said the merger between IS and OmniLink was put on hold because the former felt that by combining the two company’s networks, the “same problems facing OmniLink would be presented to IS”.

Telkom allegedly hindered OmniLink by demanding that new clients, or existing ones looking to expand their services, order lines directly from Telkom rather than via OmniLink or IS.

Walt was scheduled to continue his testimony to the tribunal on Thursday. — Craig Wilson, TechCentral