Regulators home in on Telkom's Internet arm
"We are deciding which one of the two regulatory bodies is in a better position to take the lead," a source close to the investigation said.
In just six months, Telkom's Internet arm, SAIX, has cornered 30% of the Internet market amid speculation of cross-subsidisation from the parastatal's other telephone activities.
SAIX earlier agreed it would supply the Competition Board with financial information but last week withdrew the undertaking, saying it now fell under the newly-formed Satra's authority.
"Urgent action is needed to stop the possible unfair spread of Telkom's hold," the source said, adding that both regulators were meeting again this week to finalise their strategies.
Internet service providers and Telkom's Internet customers are outraged at the parastatal's refusal to divulge its financials and its call to classify Internet protocols as a basic service. This would give it exclusive rights to run the national grid for between five and six years.
Private Internet service providers are the companies that got the Internet started in South Africa and are largely responsible for making the country the 14th most connected state in the world. About 50% of any service provider's costs are Telkom-related.
Because it is the sole telephone network provider, SAIX could benefit from preferential treatment when lines are installed and may have access to information about other providers.
Concern is also mounting that US telecoms operator SBC - which recently bought 18% of Telkom as part of its partial privatisation - will hang on to its 15% stake in cellular phone operator MTN, SVEN LUNSCHE reports.
Previously the Competition Board had suggested that SBC would be forced to sell its MTN interest because, as co-owner of Telkom, it would also control 50% of Vodacom, MTN's rival. SBC had committed itself to a sale of the MTN stake if this were to be a condition for a successful Telkom bid.
Sources indicate that since SBC's direct stake in Vodacom is a mere 8%, its control could be interpreted as "non-influential". This would ignore the substantial powers being granted to new SBC appointees at Telkom's top management level, the sources say.
Other MTN shareholders are likely to contest a ruling that SBC sell its stake.