Competition Tribunal approves Telkom's Business Connexion deal

The Competition Tribunal has approved the R2.6bn takeover of Business Connexion (BCX) by Telkom (TKG), but with conditions, the companies said on Tuesday.
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The acquisition is intended to advance Telkom's convergence strategy and help it grow its enterprise operations. Telkom said its turnaround strategy to improve performance and to reposition the company for sustainable growth had, as a key component, focused on the growth and enhancement of Telkom's information and communications technology (ICT) service offering to its customers.

Telkom CEO Sipho Maseko said: "As a result of this transaction, Telkom will be able to grow beyond its core business of connectivity by expanding into ICT (information and communications technology) services, while reinforcing our connectivity offering and enhancing Telkom's convergence strategy."

BCX employs more than 6,700 people across its operations in Africa, the UK and Dubai and generates annual revenue in excess of R6bn. BCX CEO Isaac Mophatlane said the merger would enable Telkom to expand its existing offering while, at the same time, providing scale in IT services, which "will help reinforce Telkom's core connectivity business and enhance Telkom's convergence strategy".

Some of these conditions included a price freeze on affected products in the upstream by Telkom; the ring fencing of BCX in relation to monitoring conditions and the inclusion of the copper network offering to the affected products as well as conditions on employment. The tribunal has also limited the number of job losses as a result of the merger to 60 over three years.

During its investigation, the Competition Commission found that Telkom, as the largest provider of wholesale leased lines, had the ability to deprive its rivals of access to these leased lines, which were essential for the provision of managed network services, hosting and other information and technology services. The commission said the merged entity would have the ability and incentives to engage in bundling strategies that may result in anticompetitive effects.

The deal is still waiting for final approval from the sector regulator, the Independent Communications Authority of SA, which has approved it subject to conditions. It has invited the public to make comments. Final approval is also being sought from the Department of Trade and Industry's takeover regulations panel, and the JSE.

Source: BDpro



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