Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      Public money, private plans: MPs demand Post Office transparency

      13 June 2025

      Coal to cash: South Africa gets major boost for energy shift

      13 June 2025

      China is behind in AI chips – but for how much longer?

      13 June 2025

      Singapore soared – why can’t we? Lessons South Africa refuses to learn

      13 June 2025

      10 red flags for Apple investors

      13 June 2025
    • World

      Yahoo tries to make its mail service relevant again

      13 June 2025

      Qualcomm shows off new chip for AI smart glasses

      11 June 2025

      Trump tariffs to dim 2025 smartphone shipments

      4 June 2025

      Shrimp Jesus and the AI ad invasion

      4 June 2025

      Apple slams EU rules as ‘flawed and costly’ in major legal pushback

      2 June 2025
    • In-depth

      Grok promised bias-free chat. Then came the edits

      2 June 2025

      Digital fortress: We go inside JB5, Teraco’s giant new AI-ready data centre

      30 May 2025

      Sam Altman and Jony Ive’s big bet to out-Apple Apple

      22 May 2025

      South Africa unveils big state digital reform programme

      12 May 2025

      Is this the end of Google Search as we know it?

      12 May 2025
    • TCS

      TechCentral Nexus S0E1: Starlink, BEE and a new leader at Vodacom

      8 June 2025

      TCS+ | The future of mobile money, with MTN’s Kagiso Mothibi

      6 June 2025

      TCS+ | AI is more than hype: Workday execs unpack real human impact

      4 June 2025

      TCS | Sentiv, and the story behind the buyout of Altron Nexus

      3 June 2025

      TCS | Signal restored: Unpacking the Blue Label and Cell C turnaround

      28 May 2025
    • Opinion

      Beyond the box: why IT distribution depends on real partnerships

      2 June 2025

      South Africa’s next crisis? Being offline in an AI-driven world

      2 June 2025

      Digital giants boost South African news media – and get blamed for it

      29 May 2025

      Solar panic? The truth about SSEG, fines and municipal rules

      14 April 2025

      Data protection must be crypto industry’s top priority

      9 April 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » Duncan McLeod » Telkom has a point

    Telkom has a point

    By Editor15 February 2012
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp

    By Duncan McLeod

    Telkom came out guns blazing at Competition Tribunal hearings this week, warning that if it were fined the maximum allowed for alleged anticompetitive behaviour last decade, its business could be put in jeopardy. Does the fixed-line operator have a point or is it all just grandstanding?

    In its closing submission to the tribunal, Telkom doesn’t mince its words. It warns that if the competition authorities impose a large fine on it, it will be “catastrophic” for the company and will “irretrievably jeopardise its viability ”, leading to “disastrous consequences” for the economy and for government, which remains a 40% shareholder.

    Telkom has been accused by the Competition Commission, which believes it has a watertight case, of abusing its monopoly by charging excessive prices, engaging in prohibited price discrimination and withholding services to rival companies. If the tribunal agrees with the commission, it may impose a fine of as much as 10% of Telkom’s 2003 annual revenue, or about R3,5bn.

    The fixed-line operator warns that if the maximum fine were to be imposed — the tribunal hasn’t done so in other cases — then it would plunge the struggling company into the red. It even suggests it could put key services to banks, government departments, the defence force and police service at risk.

    This is melodramatic in the extreme, but Telkom’s argument for mitigation of sentence, if it’s found guilty, is not without merit.

    The alleged anticompetitive abuses date back a decade or more. They happened at a very different time in Telkom’s history, when it was controlled by a voracious foreign management team, led by America’s SBC (now AT&T) and Telekom Malaysia, both of which were hell bent on extracting their pound of flesh from their 30% investment in the operator. They achieved that, but arguably at great cost to the SA economy.

    Telkom argues it was acting within exclusivity rights granted to it by government in return for rolling out infrastructure in underserviced parts of the country. Certainly, Telkom took telephony to rural areas through its DECT wireless network, but people in rural areas either couldn’t afford the services — Telkom hiked local call prices substantially during its five-year state-sanctioned monopoly — or preferred the convenience of mobile telephony, which was booming thanks to the introduction of prepaid services.

    Today, Telkom is a shadow of its former self. In a much more competitive market, its profit margins have come under pressure. It’s not inconceivable that the company will enter a period of protracted financial losses while it restructures to cope in a cut-throat market.

    What needs to be asked is what benefits imposing a large fine now would have on correcting Telkom’s past excesses and on SA’s economy more broadly. The answer is not a lot. Telkom’s ability to impose monopoly rents on customers has largely gone away. Even where it still enjoys a degree of monopoly control, especially in the local loop into homes, it can’t afford to institute big price increases because consumers will switch to mobile options.

    The foreign shareholders that were responsible for pushing the regulatory boundaries of Telkom’s monopoly and for the worst of the company’s excesses have long since sold out. It’s true Telkom was largely responsible for the long delays in the commission’s case reaching the tribunal — it challenged the tribunal’s jurisdiction in the supreme court of appeal (and lost) — but the company has a point when it argues that if penalties are imposed these should be “nominal or symbolic in nature”.

    Telkom’s rivals would no doubt love to see the company forced to cough up billions for its past business practices. But it’s far from clear what such a remedy would achieve.

    • Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail
    • Subscribe to our free daily newsletter
    • Follow us on Twitter or on Google+ or on Facebook
    • Visit our sister website, SportsCentral (still in beta)


    AT&T Competition Commission competition tribunal Duncan McLeod SBC Telekom Malaysia Telkom Thintana
    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleSABC gets new finance chief
    Next Article Social entrepreneurs use start-ups to change the world

    Related Posts

    MVNO boom is reshaping South Africa’s mobile market

    12 June 2025

    Watch | Lunga Siyo on Telkom’s big growth plans

    11 June 2025

    Capex clash: Vodacom, MTN and Telkom battle over network supremacy

    11 June 2025
    Company News

    Huawei Watch Fit 4 Series: smarter sensors, sharper design, stronger performance

    13 June 2025

    Change Logic and BankservAfrica set new benchmark with PayShap roll-out

    13 June 2025

    SAPHILA 2025 – transcending with purpose, connection and AI-powered vision

    13 June 2025
    Opinion

    Beyond the box: why IT distribution depends on real partnerships

    2 June 2025

    South Africa’s next crisis? Being offline in an AI-driven world

    2 June 2025

    Digital giants boost South African news media – and get blamed for it

    29 May 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.