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Settlement of the Multiple Complaints Referral

Shareholders are advised that Telkom SA SOC Limited ("Telkom") and the Competition Commission of South Africa ("Commission") have concluded a settlement agreement to resolve a series of complaints lodged against Telkom during the period 26 June 2005 to 19 July 2007 by certain Internet Service Providers ("ISPs"), namely Internet Solutions Pty Ltd, the internet division of Multichoice Subscriber Management Services Pty Ltd, Verizon Pty Ltd and the Internet Service Providers Association.

The Commission referred elements of the above complaints to the Competition Tribunal ("Tribunal") on 26 October 2009 (the "Referral"). In the Referral, the Commission characterised Telkom's conduct as a contravention of sections 8(a), 8(b), 8(c), and 8(d) (iii) of the Competition Act, 1998 ("the Competition Act").

The main aspects of the settlement package are:

  • an admission by Telkom of a contravention of sections 8(c) and 8(d) (iii) of the Competition Act;
  • an administrative penalty of R200m in cash payable over a 25 month period;
  • undertakings by Telkom regarding the functional separation between Telkom's retail and wholesale divisions along with a transparent transfer pricing programme and code of conduct to ensure non-discriminatory service provision by Telkom to its retail division and ISPs;
  • pricing commitments in the form of price reductions over the 2014, 2015 and 2016 financial years in respect of certain products, and an undertaking that the price reductions are not reversed in the 2017 and 2018 financial years. The price reductions will have an indicative value of R875 million over the 2014 and 2016 financial years; and
  • an undertaking to roll-out points of presence at strategic locations in the public sector during the 2014 financial year.

The agreement was signed by Telkom on 14 June 2013 and is subject to approval by the Competition Tribunal. Telkom and the Commission will jointly apply to the Tribunal for the settlement to be made an order of the Tribunal in terms of section 27 of the Competition Act.

Telkom has made a provision in its 2013 annual financial statements for the full amount of the R200 million penalty.

Pretoria

18 June 2013

Sponsor to Telkom:
Standard Bank of South Africa Limited