Bid for Business Connexion blocked
The tribunal is expected to release its motivation for the decision within a month.
Industry analysts had been sceptical throughout that Telkom would get the tribunal’s nod, given the company’s dominant position in the market.
But an anonymous analyst questioned the decision, saying the market had moved beyond the technical issues that had been debated by the tribunal and that competition had already increased in this space.
Telkom first announced its intention to acquire Business Connexion in November 2005, in a bid to diversify its fixed-line operations by strengthening its IT services offering.
The tribunal’s decision follows a 17-day hearing in March into the proposed merger, which was opposed by industry heavyweights, including Internet Solutions and the Internet Service Providers Association.
Telkom refused to comment until reasons for the decision had been made known.
“We have not officially been informed about the decision by the tribunal; we have just seen media reports,” said Telkom spokesman Lulu Lethlape.
Business Connexion CEO Benjamin Mophatlane shrugged off the decision, saying the company was in a strong position to carry on independently.
“It was always going to be a 50-50 decision. Telkom is a monopoly player in the market and the decision did not come as a surprise. From our point of view this is a great business that has proven itself even through difficult times,” Mophatlane said.
The decision, however, would be a bitter pill for Business Connexion, whose earnings took a knock over the continued uncertainty around the deal, while also spurring numerous resignations.
Irnest Kaplan, of Kaplan Equity Analysts, said the decision would instil confidence in the competition authorities. The industry was concerned the merger would create a powerful entity to the detriment of other IT companies. Kaplan said Business Connexion would now be able to focus on business it had been distracted from for months, while Telkom would have to go back to the drawing board to find another way of developing its IT business.
Telkom shares yesterday fell 98c to R177,02 while BCX lost 1,4% to R7,75.
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