TELKOM may be fined a RECORD r3,59bn

TELKOM faces a fine of R3,59billion - a record for a South African company - if the Competition Tribunal finds it guilty of abusing its market dominance.

This follows an announcement by the Competition Commission yesterday that it had referred its findings of abuse of dominance against Telkom to the tribunal for adjudication.

The commission said it had asked the tribunal to levy an administrative penalty of 10% on Telkom's annual turnover for its financial year ended March this year.

The telecoms parastatal's operating revenue in that period was R35,9billion.

Complaints were lodged to the commission at different times between 2005 and 2007 by the Internet Service Providers Association, MTN's unit Verizon South Africa, Multichoice Subscriber Management Services and Internet Solutions.

The commission found that Telkom overcharged Internet service providers to use its fixed-line network. It did this while keeping its own ISP service charges low.

This allowed Telkom to raise its downstream competitors' costs, making it difficult for them to on-sell to consumers.

The commission found that in 2006 Telkom's prices were more than double the average of South Africa's major trading partners.

It also found that in 2007, Telkom's prices were 30% more expensive than the average of a basket of 14 countries.

The commission said in a statement there was no doubt that these high prices detrimentally affect consumers and hinder economic development in South Africa.

Managing director of research firm BMI-Techknowledge Denis Smit said Telkom would challenge the commission's findings all the way.

"Telkom will throw every legal remedy available to them. They will also delay it for as long as possible, it is a long way from being resolved.

"The 10% fine would be a big hit on Telkom even though they are a big company and can absorb this sort of thing. But, I would be surprised if they were eventually fined that much, it will be significantly less.

"It is unusual for a fine that size to be levied and would certainly be the highest that the tribunal has given out."

Smit said 10% of annual revenue was the "maximum remedy" that the commission could recommend, but said he suspects a settlement would be reached out of court.

Africa Analysis managing director André Wills said if the tribunal did not conclude the case by the end of Telkom's financial year at the end of March next year, Telkom would have to make some form of provision in its financials for the fine. - Additional reporting by Adele Shevel