Telkom, BCX hearings draw closer

By Nicola Mawson for Telkom
Johannesburg, 07 Mar 2007

Hearings into Telkom's proposed takeover of Business Connexion (BCX) are set to kick off on Monday.

Telkom's R2.4 billion bid for the IT services company could, however, be stopped before the Competition Tribunal starts public hearings in Pretoria. Speaking at the company's recent results presentation, Business Connexion CEO Peter Watt said he would "make a call" before the hearings kicked off as to whether to pull out of the deal or not.

Watt said the company's lawyers were expected to provide feedback, on whether the bid will succeed, before the tribunal convenes. "You can't pull out the rug once the tribunal has started hearings."

BCX's results were hit by the pending acquisition, with analysts pointing to reluctance among companies to sign long-term deals with the company. Its shares have also taken a knock, and are now trading at R7, below Telkom's offer of R9 a share with a 25c per share dividend as an additional sweetener.

For and against

Parties that will be making presentations at the hearings include Dimension Data, the South African Small Medium and Micro Enterprise Forum, Gadlex - BCX's empowerment partner, and Internet Service Providers' Association (ISPA). Several witnesses are expected to testify at the hearings, which are set to continue until 12 April.

ISPA has previously come out against the deal, with co-chairman Greg Massel welcoming the Competition Commission's recommendation that Telkom be barred from taking over BCX. Last year, the commission recommended that the deal not be allowed to go ahead as it was likely to reduce competition in the sector.

Dimension Data has previously said the deal has the potential to entrench Telkom's position as a monopoly. Executive director Derek Wilcocks said the "acquisition will make it possible for Telkom to impact the downstream market for IT services".

Gadlex came out in support of the deal earlier this year, with Benjamin Mophatlane, BCX deputy CEO and Gadlex shareholder, saying the BEE company would use the opportunity to air its supportive views.

Also in support of the deal is the SMME forum, which argued that small businesses and rural areas would benefit if Telkom succeeded in its proposed takeover.