Johannesburg - The board of Business Connexion (BCX) is expected to make an announcement today on whether it will continue negotiations in the controversial R2,4-billion takeover bid by Telkom.

Deadline imminent

The board held a meeting last week to decide on the fate of the year-long proposed bid by Telkom. The deadline for all the terms and conditions to be met is tomorrow.

Yesterday BCX's chief executive, Peter Watt, would not comment on whether the company would continue with the deal or not until it had been announced on the Stock Exchange News Service today.

The deal came before the competition tribunal on Monday and was expected to be finalised the same day. But this can change if BCX decides not to continue with the matter.

An industry analyst said Telkom and BCX had come so far down the line and it would be "foolish" for BCX to terminate the discussions.

The deal is opposed by the Internet Service Providers' Association (Ispa), which has 100 members, and Dimension Data.

The legal representative of the competition commission, Owen Rogers, said while Telkom was "fighting tooth and nail" to get BCX into its stable, BCX's board was divided on the matter, with one side unenthusiastic about the deal. He suggested that parties that were in favour of the deal might have downplayed the potential damage of the proposed merger on BCX Communications.

The uncertainty surrounding the proposed merger has cost BCX potential new contracts, as some of the existing customers in the communication business opted to do business directly with Telkom.

BCX Communications provides, among other services, voice over internet protocol. The division, which was bought from Bidvest in 2005, has a market share of 2,5 percent.

Rogers said some of BCX's executives downplayed the communication division's potential to be a significant player in the telecoms market.

BCX was apparently planning to invest millions of rands to install an internet-based network and had signed a seven-year contract with a multinational telecoms operator Venco in which BCX was going to provide Venco's services locally.

Arguing in favour of the merger, Giulio Federico of research firm CRA International said BCX Communications was unlikely to be a significant player and competitor in the telecoms market.

But Rogers said it was "cynical" for Federico to assume that BCX communications would not be a serious player in the telecoms business on the basis that the company had not grown significantly to date.

Rogers questioned Federico's impartiality, and reminded him that he was an expert witness, not a "hired" gun for the merger parties.

This article first appeared in the Business Report.