Most Read Contributor in South Africa, September 2016
The long and protracted legal battle between the Competition
Commission ("Commission") and Telkom SA
SOC Limited ("Telkom") appears to be
reaching an end as Telkom and the Commission have concluded a
settlement agreement that will see Telkom paying a R200 million
fine and acceding to a number of behavioural remedies.
The Commission's statement that it had reached yet another
settlement agreement with Telkom follows the announcement in April
2013 that Telkom will pay the administrative penalty of R449
million handed down by the Competition Tribunal
("Tribunal") against Telkom in August
2012 and that Telkom will withdraw its appeal to the Competition
Appeal Court (and the Commission its cross-appeal) of a Tribunal
finding that Telkom was guilty of abusing its dominance in the
telecommunications market between 1999 and 2004, when it was a
monopoly provider of telecommunications facilities in South
This brings the total amount of administrative penalties imposed
on Telkom in the last year to R649 million.
The current settlement relates to a string of complaints lodged
by a number of Internet Service Providers
("ISPs") against Telkom's conduct
over the period 2005 to 2007, which were investigated by the
Commission and subsequently referred to the Tribunal in 2009. The
Commission's referral contended that during this period,
Telkom's conduct contravened sections 8(a), 8(b), 8(c), and
8(d)(iii) of the Competition Act (the
In its media release the Commission states that its
investigation revealed that during the period, Telkom charged
excessive prices for its high bandwidth national transmission lines
(HBTLs) and undersea cable international lines (IPLCs) and that the
prices for wholesale services to first tier internet service
providers (ISPs), used to construct their internet access and IP
virtual private network (IP VPN) services, were set such that they
precluded cost-effective competition with Telkom Retail's own
internet access and IP VPN services.
The settlement agreement includes an admission of guilt by
Telkom in respect of contraventions of sections 8(c) and 8(d)(iii)
of the Act (but excludes admissions as regards the contravention of
sections 8(a) and 8(b) of the Act).
In addition to the admissions of guilt and the agreement to pay
the administrative penalty of R200 million over a three year
period, the settlement agreement contains a number of behavioural
remedies to ensure, inter alia, the non-discriminatory
treatment of Telkom's competitors. The Commission expects that
these behavioural changes will yield an estimated R875 million of
savings to customers during the next 5 years.
The behavioural remedies agreed upon between Telkom and the
Commission include, inter alia-
the functional separation of Telkom's retail and wholesale
a transparent transfer pricing programme to regulate
transactions in the provision of network services between its
wholesale and retail divisions;
a code of conduct for the Telkom wholesale division that will
ensure non-discriminatory treatment of ISPs and protection of their
confidential service information from the competing retail
separate internal accounts for Telkom's own retail
corporate VPN and Internet access products;
price reductions in 2014, 2015 and 2016 of wholesale services
used by ISPs to deliver their IP VPN and Internet access services
(such as undersea cable international lines, national high
bandwidth transmission lines, etc) and related retail
a commitment to not reverse any of the aforementioned price
reductions in the 2017 and 2018 financial years; and
a commitment by Telkom to provide points of presence at
strategic locations in the public sector.
The Commission is of the view that the price reductions, which
are weighted in favour of the wholesale level, will bring about a
more competitive market going forward.
In its media release the Commission acknowledges the
co-operation of Telkom's new leadership throughout the
The agreement is subject to confirmation by the Tribunal.
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