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[2019] ZACT 49
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Telkom SA SOC Ltd v Trudon (Pty) Ltd (LM056Jun19) [2019] ZACT 49 (22 July 2019)
competition
tribunal
SOUTH
AFRICA
Case
No: LM056Jun19
In
the matter between:
Telkom
SA sac
Ltd
Primary
Acquiring Firm
and
Trudon
(Pty)
Ltd
Primary
Target Firm
Panel:
Norman Manoim (Presiding Member)
:
Yasmin Carrim (Tribunal Member)
:
lmraan Valodia (Tribunal Member)
Heard
on: 10 July 2019
Order
Issued on: 10 July 2019
Reasons
Issued on: 22 July 2019
Reasons
for Decision
Approval
[1]
On 10 July 2019, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction between Telkom
SA
SOC Ltd ("Telkom") and Trudon (Pty) Ltd ("Trudon").
[2]
The reasons for the unconditional approval follow.
Parties
to proposed transaction
Primary
acquiring firm
[3]
The primary acquiring firm is Telkom, a public company
incorporated in accordance with the laws of South Africa and listed
on the
Johannesburg Stock Exchange ("JSE"). Telkom is not
directly or indirectly controlled by any single firm or shareholder.
[4]
Telkom controls the following firms, Business Connexion Group
Ltd, Gyro Group (Pty) Ltd, Gyro Properties (Pty) Ltd, Swiftnet (Pty)
Ltd and Trudon, the primary target firm in the proposed transaction.
[5]
Telkom is a telecommunications service provider. It provides,
inter alia,
fixed and mobile telecommunication services,
internet services and information communications technology ("ICT")
solutions
through its various divisions and subsidiaries.
[6]
Telkom and all the firms controlled by it are, hereafter,
collectively referred to as the Acquiring Group.
Primary
target firm
[7]
The primary target firm
is Trudon, a private company incorporated in accordance with the laws
of South Africa. Trudon is jointly
controlled by Telkom, which
currently holds 64.9% ofthe shares, and Trumancon Holdings (Pty) Ltd
('Trumancon"), which holds
the remaining 35.1% of the shares.
[1]
[8]
Trudon and all the firms controlled by it are, hereafter,
collectively referred to as the Target Group.
[9]
As mentioned above, the Target Group is a subsidiary of the
Acquiring Group and is operated as a division of the Acquiring Group.
The Target Group is a local advertising and marketing firm that
provides both print services and digital solutions to local
businesses
under the brand name
"Yellow Pages".
[10]
Trudon's service offering includes the production of the
Yellow
Pages
and
White
Pages
directories,
which are distributed on a regional and national basis. Its digital
offerings include the provision of the online business
directory in
the form of the
Yellow
Pages
and
White
Pages
over
the internet, the provision of website production and hosting, and
the provision of social media advertising and search optimisation
on
Facebook, Google and Linkedln platforms.
[2]
Proposed
transaction and rationale
[11]
The Acquiring Group
intends to acquire the remaining 35.1% of the issued share capital of
the Target Group, as well as certain intellectual
property rights,
which are currently exclusively licensed to Trudon.
[3]
Post implementation, the Target Group will be a wholly owned
subsidiary of the Acquiring Group.
[12]
Telkom is of the view
that the proposed transaction will provide it with the opportunity to
fully align Trudon's strategy with that
of the Acquiring Group's.
Specifically, it will allow Telkom to fully leverage Trudon's assets
as an accelerator to execute the
envisaged Small and Medium Business
("SMB") investment strategy.
[4]
[13]
The offer made by Telkom to Trumancon, a consortium of private
equity investors, coincides with the typical investment life cycle
and requirement for private equity investors to periodically realise
the value built up in investments.
Impact
on competition
[14]
The Commission considered the activities of the merging
parties and found that there is no horizontal overlap as the
activities
of the Target Group are attributable to the Acquiring
Group. The Acquiring Group already controls the Target Group and the
proposed
transaction involves a change from joint to sole control.
[15]
Accordingly, the Commission found that the proposed
transaction is unlikely to change the structure of any market or lead
to the
accretion of any market shares.
[16]
The Commission did, however, identify a vertical relationship
between the merging parties as the Target Group provides directory
and digital advertising solutions to the Acquiring Group.
Notwithstanding this overlap, the Commission was of the view that the
proposed transaction does not change the landscape of competitive
dynamics given that the Acquiring Group already controls the
Target
Group, pre-merger.
[17]
Accordingly, the Commission concluded that the proposed
transaction is unlikely to raise any foreclosure concerns and, in
turn,
unlikely to result in a substantial lessening or prevention of
competition in any market.
Public
interest analysis
[18]
The merging parties
provided the Commission with an unequivocal undertaking that the
proposed transaction will not result in any
merger specific
retrenchments.
[5]
[19]
Furthermore, the Commission noted that as there is no
horizontal overlap between the activities of the of the merging
parties, the
proposed transaction is unlikely to result in job
duplications that may result in retrenchments.
[20]
In view of the above, the Commission concluded that the
proposed transaction is unlikely to result in any employment concerns
or
any other public interest concerns.
Conclusion
[21]
In light of the foregoing, we concluded that the proposed
transaction is unlikely to substantially prevent or lessen
competition
in any relevant market. Further, the proposed transaction
raised no public interest concerns. Accordingly, we approved the
proposed
transaction unconditionally.
_______________
Mr.
Norman Manoim
Ms
Yasmin Carrim and Prof lmraan Valodia concurring
22
July 2019
DATE
Case
Manager: Helena Graham
For
the merging parties: Werner Rysbergen of Webber Wentzel
For
the Commission: Thabiso Poswa and Wiri Gumbie
[1]
Trudon controls the following firms, Leads Machine (Pty) Ltd,
Kompare (Pty) Ltd, Connecto Labs (Pty) Ltd and TDS Directory
Operations Namibia (Pty) Ltd.
[2]
See p44 of the Record.
[3]
See p40 of the Record.
[4]
Following the Government's intention of promoting Small, Medium and
Micro Enterprises ("SMME").
[5]
See p10 of the Record.