Divided board backs Telkom
Terms of the potential takeover expired yesterday, forcing both boards to decide whether it was worth fighting for permission to conclude a deal the Competition Commission wants vetoed.
The firms agreed to extend the deadline to seal the deal until March 15, though the Competition Tribunal may not have begun adjudicating the potential deal by then.
“It was a very long and tough debate,” Business Connexion CEO Peter Watt said yesterday.
“Some parties were unhappy with the decision but that’s what a board is for, and the majority had to prevail.”
Telkom’s offer of R9,25 a share swung the extension, particularly since Business Connexion shares are trading at a much less valuable R7,30.
“In the interests of shareholders, as there is R9,25 on the table, we felt we needed to take it to a logical conclusion and understand whether the commission ruling can be challenged,” he said.
Telkom’s share price rose R2 to R134, and Business Connexion gained 7c to R7,30 yesterday before both gave up some gains.
The tribunal has proposed March 10 to 20 to hear argument on the controversial acquisition. Watt expects “some slippage” in the date, and doubts the hearings will have begun before the two boards have to recommit to the takeover or walk away. Watt said extending the deadline did not mean they would automatically go on with the hearings.
Over the next few weeks the companies would collate statistics on market share for the services they offer to prove that a tie-up would not give them too much dominance in any sectors.
They would find out what objections would be raised by industry players who oppose the acquisition and gather evidence to counter the objections.
“This is not a final decision to fight on,” Watt said. “There are gaps in our knowledge and processes that have to take place. If we are satisfied Telkom will have a strong case to put before the tribunal, we may extend it. If we don’t have a strong case, we may not take it forward.”
Telkom’s move to buy one of SA’s leading ITplayers has upset the 100 member Internet Service Providers’ Association and Internet Solutions, one of SA’s largest data carriers for corporate SA.
The commission upheld their complaints, saying the deal should be vetoed on anticompetitive concerns. Commissioner Shan Ramburuth said fair access to telecoms network infrastructure was essential, and the acquisition would frustrate that.
Both parties provided electronic communications and managed network services, and the merger would enjoy such a high market share that Telkom could raise its prices, he said.
Telkom could also raise the fees it charged rivals to access its network, and could cross subsidise its activities to price rivals out of the market.
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