29 October 2009
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Johannesburg — WHAT is the likely effect of the Competition Commission's finding that Telkom has been found guilty of market abuse for charging internet service providers excessive prices for provision of basic network facilities? Obviously, this is early in the process, and the finding has to go to the tribunal.
Technically, the fine, at 10% of group 2009 turnover, could be about R3,5bn. But it seems unlikely that even if the finding is confirmed Telkom will be fined as much. It will probably be fined in relation to the business unit involved, which could be a lot less.
Yet the problem with these findings, as Mittal has discovered, is that they tend to hang over the share price. It's hard to predict the exact quantum of the overhang, but in marginal cases it's possible to imagine shareholders wondering whether they might be in for a shock in the future.
In the case of companies with a compelling investment case, it probably wouldn't make much difference. But in Telkom's situation, it is something management will need to resolve as quickly as possible. The fact that Telkom has a separate case of anticompetitive behaviour pending before the tribunal, which dates back to 2004 and for which it faces a R3,75bn fine, won't help investor confidence at all. Telkom has taken that matter to the Appeal Court, where it is challenging the tribunal's jurisdiction to hear the matter.
ARCELORMITTAL SA confirmed on a conference call yesterday that it was one of two preferred bidders for Ziscosteel. Although Zisco is the second-biggest steel plant in Sub-Saharan Africa outside SA, it has been mired in controversy for a few years, which is likely to make this an acquisition fraught with problems for whoever buys it.
ArcelorMittal SA CEO Nonkululeko Nyembezi-Heita would not disclose how much the group was willing to pay. She said if its bid was successful, it would develop the group's strategy to add capacity to its long steel production and Zisco would provide access to a number of landlocked markets in Africa. It would also enable ArcelorMittal SA to participate in the reconstruction of Zimbabwe's infrastructure, which would make the country one of the most active markets for steel in the next 10-15 years.
But if rumours are correct about state-owned Zisco -- which arose in a 2006 report and were later suppressed -- being looted by senior Zanu (PF) ministers, the business is going to need some substantial recapitalisation.
According to the Zimbabwe Telegraph, Zisco was operating at between 8% and 10% of capacity after sanctions were imposed on it in 2007. But Zim Daily says production has been suspended entirely and the company is struggling to pay creditors and staff.
WHAT should we make of the odd scrap between Shoprite and Pick n Pay over who is the biggest in the country? The scrap is not odd because of the claim itself. Being the largest obviously involves some bragging rights.
What's odd about it is that both sides claim they don't necessarily care about size, they care about profitability. But if that is the case, why is there an argument at all?
It's not as though the language is temperate either, which might suggest both sides regard it as a side issue. Shoprite co-director Neil Schreuder claimed Pick n Pay's suggestion that it had grown market share was "hogwash".
So who is right? Unfortunately, it is not clear because the two are so close now in market share that including or excluding operations like Score make a difference.
Pick n Pay claims that it is using Nielsens numbers, not its own. But so does Shoprite.
Pick n Pay says the latest figures show Shoprite has a 29% market share and Pick n Pay has a 33,9% market share, excluding Score. Shoprite says it has a 31,67% market share, the highest it's been in a decade.
The fact is that Shoprite has been growing market share. But the fact is also that the straitened economic times tend to boost Shoprite because it is situated in a lower market segment. This game is a slightly petty side issue.
The Bottom Line is edited by Colin Anthony.
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