Telkom settlement given green light
The Competition Tribunal has approved the settlement drawn between Telkom and Competition Commission, which would see the incumbent telco pay a R200 million fine and make the telecoms market more competitive moving forward.
Competition Tribunal Chairperson Norman Manoim, congratulated Telkom and the Competition Commission on the agreement, which he noted as having been reached timeously and outside of litigation.
“I think this has been an incredible agreement reached by both parties,” he said.
“It’s certainly the most impressive consent agreement that I have seen here in my years at the Tribunal and no doubt it took a lot of hard work and many hours of negotiation.”
Telkom welcomed the confirmation, calling the settlement “the beginning of a new era in the communications sector”.
“We believe that the conclusion of this agreement is an essential element of our transformation journey,” said Telkom CEO, Sipho Maseko.
“It will allow the [Telkom] to move beyond legacy complaints and litigation that have been a drag on performance, strategic focus and sound partnerships and which occupied the attention of senior executives for a long period.”
According to Maseko, concluding the agreement enables Telkom to focus on aspects of the business that are critical to its future success.
“These include improving the profitability of the business, enhancing the service that customers deserve and ensuring the long-term commercial sustainability of the company,” Maseko said..
Telkom said it will now focus on implementation of all the provisions of the agreement and the compliance processes Telkom has committed to put in place.
Sipho Maseko
The settlement package includes:
- An admission of guilt;
- Financial penalty of R200 million;
- Functional separation between Telkom’s retail and wholesale divisions along with a transparent transfer pricing programme to ensure non-discriminatory service provision by Telkom to its retail division and ISPs;
- Effective monitoring arrangements of its future conduct;
- And wholesale and retail pricing commitments for the next five years estimated to yield R875 million savings to customers.
- The Commission expects Telkom to reduce tariffs at the wholesale and retail level over the next 3 years, which will be implemented at a specific percentage per year, rather than a fixed amount in rands.
As part of the agreement, Telkom would need to confirm and initiate changes within 6 months, as well as open up its resources to the Commission so that it could satisfy itself, through an independent expert, that Telkom was playing ball.
Telkom has also committed to a 6 month audit, to assure the Commission and the market that it has turned a new leaf.
Telkom also made commitments to reduce tariffs on its wholesale and retail products, though reductions would be weighted in favour of wholesale at a 70%/30% basis (70% reduction at wholesale level, 30% at retail level).
At the Tribunal, Telkom indicated that distance-based costs will be non-discriminatory; however, Telkom said that it is up to each business to cover the costs of getting points-of-presence into remote areas, and that they could not expect to “piggy-back” on Telkom’s costs.
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