Johannesburg, 04 May 2007
Fixed-line operator Telkom will seek an international takeover target should the Competition Tribunal reject its bid to acquire Business Connexion (BCX), as another local IT prospect would "not be an option".
Telkom Media CEO Mandla Ngcobo says the company is committed to diversifying its portfolio, and the BCX acquisition would play a key role in enabling Telkom to expand its services.
However, should the Competition Tribunal reject the BCX merger, Telkom will have no choice but to look to international IT acquisition prospects, he says.
At this stage, the market is divided as to the chances of the deal's success, particularly after the Competition Commission's earlier recommendation that the merger be blocked.
"It's not something that we would prefer [looking internationally], as money would leave the country through our investment, but Telkom has to play in the converged space and needs to expand its services," Ngcobo explains.
He says a second attempt to acquire a local IT company is not an option, as the Competition Act prohibits a company that was barred from making an acquisition from attempting another takeover move within the same industry for several years.
Rikus Matthyser, head of strategy and operations at Telkom, adds there was a protracted search for a suitable company fitting Telkom's acquisition criteria, and BCX was well ahead of other local prospects that were considered.
Neither Matthyser nor Ngcobo would comment on whether Telkom is eyeing any specific international entities, should the tribunal rule to derail the BCX deal.
Telkom recently made several significant international moves, including the acquisition of Africa Online, a Kenyan-based Internet service provider with operations in nine countries, and Multi-Links Telecommunications, a Nigerian-based telecoms provider.
The company is also driving the launch of broadcasting subsidiary Telkom Media, which has been set up to deliver the telecoms giant's pay TV service.
Hearings resume
Meanwhile, the Competition Tribunal hearings into Telkom's proposed acquisition of BCX will resume on 18 May and is scheduled to conclude on 25 May. A ruling is expected at the end of June.
Matthyser notes the merging parties have so far presented their economic argument to the tribunal. This argument was comprehensively covered and cross-examined, he adds.
Pending presentations include those by an economist for the Competition Commission, which earlier turned down the merger, and intervening parties, he says.
The final condition to the merger agreement between Telkom and BCX is that the fixed-line operator gains approval from the competition authority by 30 May. This deadline has already been extended twice, due to delays in the Competition Tribunal proceedings, with the last extension being from 15 March to the end of May.
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