The Competition Tribunal's decision to block the R2.4 billion Telkom-Business Connexion (BCX) merger has been criticised by Ovum principal analyst David Molony.
Writing in the latest Ovum EuroView Daily Comment, Molony argues there is much room for new investment in SA, but the "national authorities do not seem to want to encourage it".
He notes: "The court probably had to say that Telkom's acquisition of BCX would dilute competition, but it is a strained argument in the context of Telkom's domination of the entire communications industry. If owning BCX is too much, why is Telkom allowed to keep its ownership of most of the rest?"
Molony further states that owning BCX would have given Telkom incentive to invest in network upgrades and advanced services. He adds that the "real obstacle to enterprise business of course is Telkom's heart-stopping leased-line rates.
"But SA's government and regulators have been painfully slow to do anything about them, or to find new ways to encourage development in telecoms. Licences for value-added network services have been issued to more than 300 companies, mainly ISPs, since they were announced in 2004. But there has been confusion ever since over whether the holders can build their own infrastructure. As a result, network quality is still poor, with plenty of old X.25 lurking around."
Molony observes there is as yet no sign of commercial services from Neotel, and says the denial of the BCX bid gives Telkom the chance to turn its attention to mobile strategy.
"BCX is an ICT integrator in SA, with a big stake in the enterprise sector there. For Telkom, it made sense to get closer to enterprise customers with the offer of more advanced networking, just as BT, Orange Business Services and T-Systems have done in their different ways in Europe.
"Losing the BCX deal won't be such a blow for Telkom. But it is a setback to local industry's hopes for consolidation. Other international operators have kept their distance. BT and T-Systems have some stake in SA too, but they are not looking to consolidate there," Molony says.
Share