Telkom’s BCX hope
It seems, then, that Telkom is willing to take its case to the Competition Tribunal, and that BCX is agreeable to extending the uncertainty of a pending acquisition.
The Competition Commission had apparently scuppered Telkom’s hopes of buying a ready-made business in the networking industry, when it recommended to the Competition Tribunal in November that the deal should not be allowed to proceed.
Telephone operator Telkom had announced in April its firm intention to buy IT outsourcing business BCX at R9,25 per share; BCX shareholders had approved the offer in June.
The companies said in a joint statement today that the deadline for the fulfilment of the scheme of arrangements had been extended from December 15 to March 15.
Andrew Kingston, telecommunications analyst at Sanlam Investment Management, says the news suggests that Telkom feels it has a strong case, in spite of the ruling by the Competition Commission.
The company is likely to have a decision from the tribunal in time for the new March deadline, he says.
Kingston explains that Telkom’s networking ambitions, which it plans to fulfil by swallowing BCX, is in line with trends elsewhere.
“There is not much growth opportunity in fixed-line business; BCX would give Telkom access to managed data networks without having to set these up from scratch.”
He says that, given the shortage of skills in the networking environment in South Africa, it would be difficult for Telkom to build up a networking business from a zero base, on the scale that it needs.
By tapping into BCX, Telkom would be extending its limited relationship with the corporate market and would be able to expand its suite of services.
Aside from its need to find new avenues of growth and profitability, Telkom would be feeling the potential threat from Neotel, the second network operator, which will be entering the market with a strong corporate offering.
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