Telkom: the damage is done
So the Competition Tribunal, in levying a whopping R449-million fine on Telkom, has confirmed what everyone knew: it abused its market dominance.
The nearly half-billion rand punishment is apt but the damage to the South African economy has already been done. Years of overpriced telecoms services, especially broadband, have robbed the country of a decade and a half of competitive advantage.
The rest of the world experienced a broadband boom while South Africa's ranking in internet penetration fell behind that of other African countries with less robust economies. This was because Telkom was able to shore up its profits without any serious fixed-infrastructure competition.
Protected by legislation, every internet service provider and telco was forced by legislation to use Telkom's infrastructure, which was absurdly overpriced.
The culprit isn't just Telkom - it's also the company's major, and delinquent, shareholder: the government. Years of misguided management by former minister Ivy Matsepe-Casaburri and her over-zealous protection of a hopelessly incompetent management at Telkom, are primarily to blame.
The first problem was the five-year exclusivity given to Telkom to roll out services in so-called under-serviced (read rural) areas. It was a smokescreen to protect the 30% investment by a consortium of SBC (now AT&T) and Telecoms Malaysia. Jay Naidoo, then the telecoms minister, admitted years later that it had been a mistake.
At the announcement of the exclusivity decision, which I attended in 1997, a foreign correspondent muttered to me that it was foolhardy. But anyway the whole thing was superseded by the popularity of the much cheaper, more portable cellphone.
Telkom's profiteering was spectacular and destructive. But the real damage was done by Naidoo's successor, the aptly nicknamed Poison Ivy. She was as thoroughly useless a minister as that other loyal pawn of the Thabo Mbeki years, Manto Tshabalala-Msimang.
Matsepe-Casaburri allowed Telkom's management free rein to exploit the country's citizens and fought off any attempts by the industry to open up competition. Skype was outlawed at one stage.
The current liberalisation came about only because of court cases initiated by private companies sick of being exploited, most notably when Altech took the Department of Communications to court to get clearance to build its own networks. The litigation has resulted, finally, in true competition and a number of telcos and consortiums have laid their own fibre networks. But the full benefits have yet to reach the consumer.
Political appointee and telecoms Luddite Papi Molotsane was Matsepe-Casaburri's choice of Telkom CEO and his lack of understanding of technology and telecoms led to him investing in the fast-growing Nigerian market. The problem was that the company in which he invested, Multi-Links, used outdated tech and this foolish gamble wiped R10-billion off Telkom's books.
Part of the problem is that the government simply doesn't understand the importance of telecoms and the communications boon it has generated in the global economy. They're too busy building Zumaville or propping up Eastern Cape or Limpopo education officials to get votes in Mangaung.
The government also fails to realise that the telecoms portfolio is vitally important and not the dumping ground for politically connected but flawed ministers. After Matsepe-Casaburri came a number of other misguided, equally controversial, appointments, including those of Siphiwe Nyanda and Dina Pule. After promising starts, both have been mired in nepotism scandals; and have lost the confidence of the industry they were appointed to oversee.
The government should have sold its share of Telkom when it listed and left the running of the business to real professionals like current CEO Nombulelo Moholi, who is making admirable attempts to save a ship that has already hit the iceberg.