for the year ended 31 March 2011
The arbitrator's award was delivered on 11 June 2010. The arbitrator awarded an amount of USD30.5 million, excluding interest from March 2001, to Telcordia. Telkom paid an amount of USD8.7 million during 2007, which was in respect of conceded claims. The amount of the claim, plus interest thereon, as at 30 June 2010 was approximately USD82.7 million. The parties settled the matter on the basis that Telkom pay an amount of USD80 million, plus applicable VAT, which was paid.
RSSS has invoiced Telkom for an amount of R97 million for apparent system upgrades in terms of M3010 standards and/or replacement of alarm systems, dating back to 2008. According to Telkom's investigations, there are no records of any contracts concluded with RSSS for the upgrade and/or replacements of alarm systems, nor are there any acceptance of quotations previously provided by RSSS. Telkom also has no record of any written instructions to RSSS in this regard or purchase orders being placed for the provision of M3010 upgrades and/or system alarm replacements. Telkom's internal legal counsel has advised that this invoice should not be paid.
Multi-Links has on 20 December 2010, initiated a civil action against Helios regarding the validity of the Master Lease Agreement. The matter has been heard and judgement was passed on 7 June 2011 in favour of Helios. Helios brought a counter application against Multi-Links on 23 December 2010 in which they, amongst other things, requested an interim status quo order (to keep the status of the parties' positions in terms of the contract intact for an interim period); an interdict against the sale of Multi-Links' assets and a claim for damages in the amount of USD252 million relating to so called "anticipatory breach of contract". The interim status quo order was granted to Helios in December 2010 but, in terms of Nigerian Court rules, expired seven days after it was granted. The Court refused the interdict preventing the sale. The damages claim of Helios has not yet been heard. Certain cost orders have been awarded against Helios. The parties are still continuing to perform in terms of the Master Lease Agreement.
Telkom remains committed to exiting Multi-Links' CDMA business.
Multi-Links has terminated the Super Dealer Agreement with APSN on 25 November 2010, as a result of their breach of contract. APSN has in turn terminated the agreement based on alleged breaches by Multi-Links. In terms of the agreement, the parties agreed that any dispute will be referred to arbitration in South Africa. APSN has indicated that they will refer their claim to arbitration. Multi-Links has not yet received APSN's particulars of claim. Multi-Links is preparing its counter claim.
Telkom is party to a number of legal proceedings filed by several parties with the South African Competition Commission ('CC'), alleging certain anti-competitive practices described below. Some of the complaints filed at the CC have been referred by the CC to the Competition Tribunal ('CT') for adjudication. Should the CT find that Telkom committed a prohibited practice as set out in the Competition Act, the CT may impose a maximum administrative penalty of 10 % of Telkom's annual turnover in the RSA during Telkom's preceding financial year, in respect of the SAVA and Omnilink, Internet Solutions and Multiple Complaints Referral matter respectively. In the IS matter, IS has requested that the CC imposes two administrative penalties. However, Telkom has been advised by external legal counsel that the CT has to date not imposed the maximum penalty on any offender in respect of the contraventions Telkom is being accused of.
This matter relates to the complaints filed by SAVA on 7 May 2002 and a complaint filed by Omnilink in August 2002 against Telkom at the CC, regarding certain alleged anti-competitive practices by Telkom such as refusal to give a competitor access to an essential facility, engaging in exclusionary acts, inducing a supplier not to deal with a competitor and price discrimination. The matter is proceeding before the CT. Telkom filed its opposing affidavit and the CC filed its replying affidavit. The CC also filed an amendment application to include an allegation of an alleged contravention of sections 8(a) and 8(c) of the Competition Act. It is Telkom's view that this was an attempt by the CC to include excessive price and margin squeeze cases respectively. The application was heard on 21 April 2011. The CT issued its ruling on 4 May 2011, granting the CC leave to amend its papers in certain nominal respects, but dismissed the CC's application to include the allegation of an alleged contravention of section 8(a) and 8(c) of the Competition Act. The CC delivered its amended complaint referral on 12 May 2011. The main matter has been set down for hearing at the CT from 17 to 28 October 2011 and from 1 to 9 December 2011.
IS filed a complaint at the CC in December 2007, alleging certain anti-competitive practices by Telkom such as excessive pricing, margin squeeze, bundling, price discrimination and exclusionary acts. Certain parts of this complaint were referred to the CT by the CC. The non-referred parts of the complaint were self-referred by IS. IS self-referred allegations such as exclusionary conduct in respect of the retail broadband (including ADSL) market, excessive pricing in respect of ADSL and leased lines below 2Mbps and price discrimination with regard to Telkom's VPN Supreme product. Telkom filed an exception to IS' referral papers. The CT ruled that IS must amend its papers, and IS filed its amended papers. However, the papers remain excipiable and Telkom has thus filed a second exception application on 4 April 2011. IS did not deliver answering papers to Telkom's application within the requisite time period. Should Telkom's exception application be upheld, IS' amended referral may be set aside, alternatively the CT may order IS to amend its papers, in which case Telkom will have to plead to IS' amended papers. Telkom has not yet been notified of a date for hearing of its application.
The CC served a notice of motion on Telkom on 26 October 2009, in which it referred complaints against Telkom by MWEB and Internet Solutions ('IS') as well as the Internet Service Providers Association ('ISPA'), MWEB, IS and Verizon SA respectively, to the CT. The CC alleged certain anti-competitive practices by Telkom, such as excessive pricing, refusal of access to an essential facility, exclusionary acts, refusal to supply scarce goods to a competitor and bundling.
Telkom opposed the Multiple Complaints Referral and filed an exception application on 15 March 2010 in respect thereof, and the CC filed its answer to the exception application. The exception application was heard on 11 October 2010 and dismissed on 4 February 2011. Telkom is preparing its responding affidavit to the main referral.
Telkom was informed by the CC that a complaint was filed by Phuthuma at the CC, wherein Phuthuma alledges that "Telkom has contravened section 8(c) of the Competition Act no 89 of 1998, as amended, by abusing its dominant position in engaging in anti-competitive conduct in the telegraphic and telex maritime services market by unilaterally awarding these services to Network Telex." The CC non-referred the complaint on 28 June 2010. However, Phuthuma self-referred its complaint to the CT on 20 July 2010, alleging that Telkom engaged in an exclusionary act by appointing Network Telex in 2007 "without any formal procurement process." Telkom filed its opposing affidavit in which it raised certain preliminary points, and Phuthuma filed its replying affidavit. Telkom's preliminary points were upheld by the CT on 2 March 2011 and Phuthuma's complaint was dismissed with costs. Phuthuma is appealing this decision and has filed a notice of appeal to the Competition Appeal Court on 24 March 2011.
On 20 August 2009 Phuthuma served a summons on Telkom for damages arising from a tender published on 30 November 2007 for outsourcing of the Telex and Gentex services and for the provision of a solution to support the maritime industry requirements. The tender was cancelled on 10 June 2009, without any award being made, due to the expiration of the validity period. Phuthuma has alleged that Telkom had awarded the tender to a third party outside a fair, transparent, competitive and cost effective procurement process. It has claimed damages of R3,730,433,545.00, alternatively R5,513,876,290.00, and further alternatively R1,771,683,580.00 plus interest at 15.5% per annum to date of payment from April 2008, alternatively from 30 April 2009 being the date of notice in terms of Act 40 of 2002, further alternatively from date of service of this summons plus costs of suit and further and/or alternative relief. Telkom is defending the matter, which is set down for hearing from 24 October 2011 to 18 November 2011 in the North Gauteng High Court.
The matter arises from a tender award which was made on 8 November 2007 outside the validity period of 120 days, relating to construction of network services. In November 2009 the Board resolved to apply to the North Gauteng High Court to set aside the aforementioned award. Concurrently with the Telkom application to set aside the award, Bihati also applied to the North Gauteng High Court for the review and setting aside of the Board's decision. On 7 January 2011 the North Gauteng High Court granted Telkom's application and dismissed Bihati's application. Bihati's application for leave to appeal was dismissed on 25 March 2011. Bihati has petitioned for leave to appeal against the North Gauteng High Court decision.
During October 2009, SANRAL applied to the KwaZulu Natal High Court for an interdict and declaratory order against Telkom. SANRAL requested the Court to grant an order preventing Telkom from installing facilities without compliance to the SANRAL Act and to remove facilities installed by Telkom in the N2 National road reserve in KwaZulu Natal as part of Telkom's FIFA project. On 25 October 2010, the Court granted a declaratory which prohibites Telkom from entering SANRAL's land without compliance to the SANRAL Act. On 18 January 2011 Telkom was granted leave to appeal against the full judgement and is awaiting a date for appeal.