South Africa’s Competition Tribunal is reported to have blocked a bid by national telecoms operator Telkom SA for national ICT services provider Business Connexion Group.
The tribunal has yet to formally announce its decision, but is expected to do so later this month, when it will explain its reasons.
Telkom originally announced its bid for BCX in April 2006, when it offered the equivalent of about $323 million for the company.
Comment: There is plenty of room for new investment in South Africa, but the national authorities don’t seem to want to encourage it. 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?
Local service providers like Internet Solutions, a subsidiary of Dimension Data, will be pleased their opposition to the BCX deal has been heard. But owning BCX would at least have given Telkom an incentive to invest in network upgrades and advanced services.
The real obstacle to enterprise business of course is Telkom’s heart-stopping leased line rates. But South Africa’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 (VANs) 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.
A second national telecoms operator licence has been awarded to SNO Telecommunications, operating as Neotel. Its investors, which include VSNL of India, expect to invest $1.5 billion over the next three years. But there are no signs of commercial services yet.
Telkom SA is free to turn its attention to mobile strategy, now that its contested bid for BCX has been denied.
BCX is an ICT integrator in South Africa, with a big stake in the enterprise sector there. The company reported revenues of 3,208 million rand for the last financial year to May 2006 and 1,726 million rand for the six months to 30 November 2006. Of that last half year sales total, more than half was produced in services, but another 541 million rand was in technology infrastructure, the building block for a networked economy.
For Telkom SA, 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 South Africa too, but they are not looking to consolidate there.
BT Global Services has local infrastructure supporting its key customer in the region, Reuters. But it is unlikely to do more in the current circumstances. T-Systems has legacy infrastructure dating back from a joint venture with Telekom Malaysia.
Elsewhere in Africa at least, the picture is a bit better. MTC has spent $10 billion on infrastructure since its acquisition of pan-African mobile operator Celtel.
Source: Ovum
