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S. Africa's Telkom hit with $54.8M fine

Jon Gambrell, Associated Press

The Lukasrand Tower with the Telkom branding is photographed in Pretoria, South Africa, Tuesday Aug. 7, 2012. A government tribunal fined South Africa's Telkom SA Ltd. $54.8 million over a decade long case alleging the company used its monopoly to put unfair prices on its competitors. (AP Photo/Denis Farrell)

JOHANNESBURG (AP) -- Regulators fined South African telecommunications company Telkom SA Ltd. $54.8 million on Tuesday for "bullying" its competitors with a monopoly hold on the country's Internet access and other services.

The decision by the Competition Tribunal of South Africa found Telkom charged its competitors high prices for using its Internet services or locked them out, while charging much lower fees to its subsidiaries and its customers. The tribunal looked at Telkom's business practices from 1999 to 2004 in making its decision.

The fine could have been much worse for struggling Telkom, as the regulatory tribunal initially looked at levying as much as a $390 million penalty against the company for its practices. However, the tribunal's 46-page ruling acknowledged the company enjoyed a regulatory monopoly at the time examined and faced a massive debt then that required it to raise cash quickly.

Still, the ruling over Telkom's actions didn't hold back, saying the company's actions kept prices for Internet access high and slowed innovations needed in the nation's telecommunications field.

"This harm to competition is likely to continue far into the future," the ruling read.

In a statement after the ruling Tuesday, Telkom said it was "reviewing the judgment and is taking advice as to its options." Though partially privatized, the South African government still owns 39 percent of Telkom's stock. Public Investment Corporation Ltd., a state-run pension plan for government employees, owns more than 10 percent of the company.

The case began in 2002, with Internet service providers alleging Telkom refused to offer them access to their facilities, overcharged their customers and offered unfairly lucrative deals to Telkom customers.

"Having taken the law into its own hands, Telkom enforced its exclusivity rights ... acting as judge, jury and enforcer in a selective manner," the commission's ruling reads.

The case wound its way through courts before coming to the Competition Tribunal, which oversees anti-trust matters in South Africa. Its ruling orders Telkom to pay half of the fine within six months to the government's national revenue account.

This is just the latest trouble to strike Telkom, which has had financial difficulties in recent years. While operating in other African nations, it recently pulled out of Nigeria's market at a loss. Subscribers also have increasingly dropped fixed telephone lines, the backbone of Telkom's business, for mobile phones.

In February, South Africa's cabinet declined to sell a 20 percent stake in the company to South Korea's KT Corp. Some officials have discussed again nationalizing the ailing company, though no formal steps have been taken toward that.



Telkom SA Ltd.: www.telkom.co.za


Jon Gambrell can be reached at www.twitter.com/jongambrellap.