The reasons why Telkoms bid for BCX was blocked

August 21, 2007

Telkom’s R2.4bn proposed purchase of BCX was denied by the Competition Tribunal because it was a clear business tatic to prevent deregulation and stifle competition.

Business Connexion shareholders accepted the offer readily, but there was a staff exodus as technicians baled out, fearing they would became part of a parastatal notorious for stifling technology innovation. Both the ISPA (Internet Service Providers Association) and multiple ISP’s challenged the bid.

The tribunal said convergence of voice and data services depended on networking technologies dominated by market leaders. The takeover would have removed an effective competitor as Business Connexion was “poised to become a formidable competitor to Telkom” in managed network services. The deal would have let Telkom gain a much larger market share and had a detrimental effect on competition by making it harder for rivals to grow and possibly push smaller rivals out of business.

The tribunal ruled that Telkom would just be taking BCX out of the market to compete against telkom for converged data and voip services.