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DOC to intervene in Telkom lawsuit


Johannesburg, 19 Jan 2011

The Department of Communications (DOC) has been instructed by president Jacob Zuma to intervene in an impending R3.7 billion court battle between Telkom and Phuthuma Networks.

DOC spokesperson Tiyani Rikhotso has confirmed the instruction: “The office of the minister of communications has received correspondence from the presidency with regard to this issue and it is receiving the minister's attention.”

According to media reports, Zuma's involvement in the matter stems from a series of letters, authored by Phuthuma bosses, regarding the merits of their case.

Phuthuma Networks could not be reached for further comment; however, Telkom says the matter is subject to litigation and that it does not litigate in the media.

With Phuthuma having already secured its day it court, it is unclear why the company has been lobbying for government intervention on the matter.

However, Paul Jacobson, attorney at Jacobson Attorneys, speculates that Phuthuma may be seeking an out of court settlement in the matter.

Phuthuma Networks is suing Telkom over a tender published in November 2007, for the outsourcing of Telkom's Telex and Gentex Services, and to provide a solution to support its maritime industry requirements, the fixed-line operator says.

Telkom cancelled the tender last June without awarding it, as the validity period of 180 days had lapsed. The company says it is defending the action, which is set to go to court on 17 February.

Settlement motive

Jacobson suggests that Phuthuma's decision to involve Zuma and subsequently DOC minister Roy Padayachie may be indicative of the company's willingness to facilitate some kind of resolution before entering into lengthy and costly court proceedings.

Alternatively, he explains, Phuthuma's decision to appeal to such high influence may indicate the company's intention to possibly coerce Telkom's executive management into conceding something.

Jacobson also points out that Puthuma may be appealing to government as the majority shareholder in Telkom. In so doing, the Telkom board may appeal to management to resolve the matter outside of court.

Jacobson cautions that his statements are purely speculative as he is not privy to the details of the case. However, he remains steadfast that government's involvement, be it Zuma or Padayachie, must not amount to interference with court proceedings.

Telkom confident

Meanwhile, Telkom previously explained it had not included a provision in its year-end financial results for Phuthuma's claim, because it believes the case has little merit.

“Telkom's external legal representatives have assessed the merits of the Phuthuma claim(s) and have advised Telkom that the probabilities of success of the entire claim are very low, taking cognisance of the history and facts of the matter.

“The probabilities are such that no provision is required, according to the factors one takes into account when deciding whether to make a provision or not. This is so because, even if there is an amount to be paid, it would probably not be of a material nature and hence no provision is required,” Telkom stated.

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