Telkom, Didata make peace

Telkom’s legal woes eased a little last week after it reached an out-of-court settlement in a four-year legal dispute with the country’s biggest Internet service provider, Dimension Data subsidiary Internet Solutions (IS).

IS and OmniLink (a Didata subsidiary which was subsequently folded into IS) sued Telkom for R127m in damages in 2003, alleging that the fixed-line operator had unlawfully withheld telecom services from the two companies. They alleged that Telkom’s actions had caused enormous damage to their businesses.

Telkom legal services executive Anton Klopper says the company did not believe that IS and OmniLink could prove to the court that they had applied for the facilities they allege were denied them. “In our opinion it was a frivolous claim anyway.”

But, Klopper says, it was also Telkom’s view that, under the old Telecommunications Act, one value-added network service (Vans) licensee could not cede telecom facilities to another. Both IS and OmniLink were licensed as Vans operators under the act. Klopper says the two companies were ceding facilities to one another in contravention of the act. “Two Vans licensees couldn’t provide services on the same network.”

But IS chief operating officer Johann Pretorius says Telkom was “not fulfilling its statutory obligation” to supply facilities to Vans licensees.

In the past, Telkom has been accused by Internet service providers of behaving as if it, and not the Independent Communications Authority of SA, regulated the sector. In the absence of meaningful competition, service providers such as IS still rely heavily on Telkom’s facilities to provide services to their customers. But, with second network operator Neotel about to get off the ground and competition coming from other quarters, Telkom will have to be nicer to third-party service providers if it wants to retain their business. IS is Telkom’s biggest client.

In terms of the settlement between the two parties, Telkom has agreed not to withhold facilities from IS and will meet a defined service-level agreement where it will provide facilities and do repairs within specified times. In return, IS has agreed to drop its damages claim against the operator.

“We think it’s a win-win settlement,” says IS business development director Hillel Shrock “We have secured some important service-level agreements in a court order. We are quite satisfied with what we’ve achieved.”

Shrock says the court order is more binding on Telkom than statutory or contractual obligations.

Telkom’s legal woes don’t end with the IS settlement, though. The company is still fighting fires on a number of fronts. The competition authorities are probing Telkom for alleged anticompetitive behaviour stretching back years.

And the recent loss of its appeal in the constitutional court in its dispute with US software supplier Telcordia could cost it a small fortune. Telcordia is demanding US128m in damages, though the final figure, to be determined in arbitration proceedings later this year, is likely to be quite a bit less.

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Telkom, Didata make peace