State’s role in Telkom “chilling”
A legal expert says the competition tribunal’s observations regarding the role that state shareholding played in exacerbating anti-competitive behaviour by Telkom is “chilling”, in the face of recent reports that it may be nationalised.
The tribunal on Tuesday (7 August) imposed a penalty of R449 million on Telkom SA for abusing its dominance in the telecommunications market between 1999 and 2004 – a period in which Telkom was a monopoly provider of telecommunications facilities.
The tribunal concluded that Telkom leveraged its upstream monopoly in the facilities market to advantage its own subsidiary in the competitive value added network market – Telkom’s conduct caused harm to both competitors and consumers alike and impeded competition and innovation in the dynamic value-added network services (vans) market.
Chris Charter, director in the competition and regulatory practice at Cliffe Dekker Hofmeyr business law firm noted: “The tribunal lays some of the blame for the travails that beset the vans providers at the door of the regulator (Icasa and before that, Satra) and the minister of communications.”
He continued, saying that the regulatory framework was allowed to stagnate due to inaction and poor enforcement and the resultant uncertainty left Telkom with sufficient “wiggle-room to preserve its position”.
“On a similar note, the tribunal laments the clear conflict of interest suffered by the minister in being both in charge of telecoms liberalisation as well as a major shareholder in Telkom. This latter fact led Telkom to believe that it was entitled to protection, emboldening it to act as it did,” Charter said.
These circumstances, he noted, were treated as mitigating factors and led to a 30% discount off the fine that might otherwise have been imposed (could have been R642 million).
“The tribunal’s observations regarding the role that state shareholding played in exacerbating anti-competitive behaviour by Telkom is chilling in the face of recent reports that Telkom may be nationalised – creating an even stronger conflict of interest in a market where Telkom is still a very important service provider to a strategic industry,” Charter finished.
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