BCX, Telkom deal faces more delays

By Nicola Mawson for Telkom
Johannesburg, 10 Oct 2006

The Competition Tribunal has granted an extension to the Competition Commission, which gives it until 17 October to file its recommendations on Telkom`s proposed takeover of BCX.

The extension, the third in the process, was granted because the commission had to replace its lead investigator, third-party information is still outstanding, and the commission had to bring in independent experts.

Telkom has previously stated that the deal should be completed before the country winds down for its year-end break. Now, however, market commentators are not expecting it to reach tribunal level before the end of the first quarter of next year.

The deal was initially lodged with the commission on 15 June, when it had 40 days in which to review and refer the matter. It can, however, apply for a series of extensions, which give it an extra 15 days at a time. However, this requires consent from all parties.

In its reason for the decision, tribunal panel presiding member Norman Manoim said: "Telkom, it seems, would prefer not to run the risk of having to rely on the consent of BCX for the extension."

Telkom`s lawyer, Gareth Driver, from Werksmans, suggested to the tribunal that the matter should simply proceed to tribunal stage, but the tribunal felt that "conducting hearings without a recommendation would compromise their quality, and be unfair to third parties".

Unrealistic timeline

Driver conceded to the tribunal that it would be unrealistic for the tribunal to have considered the merger and made a decision by 15 December, Telkom`s original deadline.

One analyst, who spoke on condition of anonymity, stated: "Opponents to the deal are playing hard ball." He added that Telkom`s previous behaviour towards least cost routers and VANS had perhaps led to "payback time".

"Maybe the opponents are hoping that if they delay in their objections, the two parties will walk away from the deal."

In a statement released yesterday, the tribunal said that the commission was still waiting for outstanding information from third parties, and the merging parties, which it requires in order to make its recommendation. Requests were sent to 22 firms, of which seven have replied so far.

Manoim said the commission had approached the Independent Communication Authority of SA (ICASA), and the Department of Communications for input. "At the date of this application, a response from ICASA is still awaited. The Department of Communications has responded, but indicated that it may wish to make a follow-up response."

Reasonable request

As a result of outstanding objections, he said the commission`s request was reasonable. "It appears from the commission`s papers that this is a complex merger and Telkom, in argument, did not dispute this. Given the large number of parties to be consulted, the complexity of the issues and the need for possible follow-up requests, I do not consider the request for further time on this ground unreasonable."

Other factors that led to the extension being granted include that a new lead investigator was appointed at the beginning of last month and the commission needed to bring in expert consultants.

The deal, the tribunal said, goes beyond the usual ambit of competition law. As a result, it requires "specialist knowledge of a sector that is new and untested legislation in the form of the Electronic Communications Act no 36 of 2005".

The commission has appointed a firm of attorneys that specialises in telecommunications law, as well as an economist to assist it.

Telkom was not prejudiced by the present extension, Manoim added. "But even if it is, the commission must perform its public duty, which is to investigate the possible effects of the merger."