The company faces legal claims due to alleged tender irregularities.

JOHANNESBURG - Telkom (JSE:TKG) faces hundreds of millions of rand, probably exceeding a billion in legal claims by service providers due to alleged tender irregularities at the company.

Telkom has admitted that it was facing potentially damaging substantial legal claims, but referred Moneyweb to a part of its annual report, which frankly and unambiguously deals with these issues.

Telkom concedes that it could be required to pay substantial penalties in damages, which could adversely have a material impact on its revenues.

"Telkom may need to spend substantial amounts defending these claims even if Telkom was ultimately successful. And If Telkom were to lose these or future legal and arbitration, Telkom could be prohibited from engaging in certain business activities and could be required to pay substantial penalties in damages, which could cause Telkom's revenue to decline and a have a material adverse impact on the business and financial condition."

Telkom adds that it may be required to fund any penalties or damages from cash flows or drawings "on our credit facilities, which cause Telkom's indebtedness to increase."

However, Telkom has declined to comment on precisely how much it is being sued for. 

A company called Phuthuma Networks alone is suing Telkom for R500m. Phuthuma alleges Telkom acted corruptly and dishonestly in awarding a R1.5bn tender to Network Telex. The tender was for the outsourcing of the e-telegram, Telex and Gentex services to support the maritime industry and the SA Post Office.

The other claim is by Maredi Telecom, which served a notice on Telkom, Ericsson SA and Telsaf Data in January 2009.

The matter relates to a tender published by Telkom for the supply of point -to-point split mount microwave equipment.

Maredi, Telsaf, Ericsson and a fourth company Mobax, were short-listed. The tender was awarded by Telkom to Telsaf and Ericsson.

Maredi applied for a court order, with a court date set for February 3, 2009, requesting that the court prevent Telkom from entering into a contract with Ericsson and Telsaf or either party and from ordering goods or services from Ericsson and Telsaf pursuant to the tender.

Maredi also requested an order that the court review and set aside the award of the tender to Telsaf and Ericsson or either of the aforementioned parties, and refer the tender back to Telkom in order for Telkom to reconsider its awards.

Maredi alleged that there were certain irregularities in the tender process in that Telkom did not follow fair procedure by failing to comply with its own mandatory procedural requirements, that Telkom acted arbitrarily and in bad faith, that Telkom was biased in favour of Ericsson and that Ericsson should have been disqualified as it failed to meet Telkom's critical criteria as set out in the tender.

Maredi's application was dismissed with costs on February 20 2009. However, Maredi is proceeding with a review application in the ordinary course and Telkom is opposing the application.

"Telkom is not currently able to predict when these disputes may be resolved or the amount that Telkom may eventually be required to pay," admits Telkom in its annual report.

*Sipho Ngcobo is former deputy editor of Business Report and ex-managing editor of Enterprise Magazine. He was one of the original team members of Business Day when the paper was launched in May 1985. He was a correspondent at international news agency Dow Jones where he reported on markets and companies in the early 1990s. He has also written for such publications as the Sunday Times, the World Paper in Boston and was employed by the New York Times Group in the US between 1989 an 1991. 

Write to Sipho Ngcobo: sipho@moneyweb.co.za

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THEY JUST KEEP ON LOSING AND LOSING Was it only last year that Telkom had to settle a massive claim with a US IT records provider? Their service is shoddy and outdated, why don't they just recognise that the writing is on the wall for copper fixed line and get going into wireless . .more local loop ASAP? Blunder after blunder and now they will be down 55% on Monday 23rd Nov. How do they keep shareholders in any case? . .less by ER on November 20 2009, 06:29 Find this comment inappropriate? Report it

Telkom is sounding more like Sasol every day always embroiled in legal suits whether in SA or overseas. by . on November 20 2009, 06:45 Find this comment inappropriate? Report it

More loyal ANC cadres causing havoc and impoverishing the contury A better life for all is not possible if everyone is corrupt and nothing is done about corruption. Look at who is paying for Selebi's defence to know that the ANC government is corrupt through and through. Even if Selebi is technically not guilty he . .more is corrupt and a thoroughly inappropriate person to have been appointed chief of police. How on earth could he have provided information from police files to criminals that are being investigated? And Selebi still receives support on his way in to court in the mornings? Don't people realise that dishonesty is something that makes everyone poorer? . .less by semaarnet on November 20 2009, 07:25 Find this comment inappropriate? Report it

Telkom Another state rune enterprise going to the toilet! by Taffy Dee on November 20 2009, 10:39 Find this comment inappropriate? Report it

telkom... helkom I moved premises last year. I cancelled my old lines and took out new lines at my new premises. telkom sent me an outrageous bill for rent way beyond the date on which i cancelled my old lines. I ignored them For 6 months i tried . .more to get a statement of account from them. they sent me threatening SMS telling me that they "were going to come and collect my assets" I still tried to get a coorect statement of account. I got letters from a dumb bunch of attorneys in vanderbijl park threatnening me with black listing I phoned them and told them to phuque off Eventually i got a correct stement and paid it --- more than six months after moving!. i still got threatening letters fro those shmattornies in vaderbijl informing me how much interest. costs, and charges i owed them I phoned them again and told them to phuque off again. eventually they phoned me a few weeks later to tell me that the account had been paid ( darn it it was i who had paid it so i should know it had been paid) and that, contrary to their earlier letters about blacklisting, they had NOT blacklistedme Bunch of puiquers. These attorneys need to get a black eye-- they must frighten the Sh12 out of a lot of people. when i told them to phuque off they crumbled i will list their name on this site . .less by Plutarch on November 20 2009, 20:17 Find this comment inappropriate? Report it

the name of the attorneys Cronje, de Waal-- Skhosana Inc. Formerly Cronje, de Waal & Van der Merwe My mistake; not Vanderbijl but Secunda Their letter informed me that I would be listed at the credit bureau and would only be removed as soon as . .more payment (including costs blah blah blah) was recieved. Their letter was a sham--- they had not listed me at all and were only trying to frighten me----- bustards . .less by Plutarch on November 20 2009, 20:31 Find this comment inappropriate? Report it

There is no end to the corruption the blacks are up to ably supported by BEE deployment and the just... The ANC must take full credit for allowing, encouraging as some say, daily murders on an unprecedented scale, corruption like never before, in fact if you are not corrupt when you do your tender you are probably laughed at. Deployment is such a . .more useless communist type method of promoting corruption but they have it down to a T and are very successful in promoting corruption via deployment. Shaik Yengeni and the dancer are great examples of African justice so why bother with police and the JSC?Horrible policies designed to steal money and cripple the country in my opinion. Out with them and all who promote them. Comrades and Cadres - for heavens sake Zuma it is 2009 and it is only the ANC in the whole world who believes in Communism! HIV does not cause AIDS, Crime is a perception, Communism works, Nationalise all Companies, Support Mugabe etc how pathetic and ignorant and self serving they are. . .less by Bang goes SA and 2010 and the lights on November 21 2009, 10:12 Find this comment inappropriate? Report it

Viva Telkom Telkom is trying desparetely to stay solvent by giving the tender to Ericsson and Telsaf that has a proven track record, instead of the two black enterprises. These black enterprises would not be able to deliver the goods in any case, now they are . .more trying to get money out of Telkom by an alternative way. This is very underhand. Big business should be allowed to take whoever they choose...that is free choice and we all should fight for it. May Telkom win and the others loose with costs. . .less by free choice on November 23 2009, 08:42 Find this comment inappropriate? Report it

same old story another compnay run predominantly by black people - another scandal - more money lost SAME OLD STORY!!! by phil on November 23 2009, 08:42 Find this comment inappropriate? Report it

Where is the copper With copper thiefs like we have in this country, Telkom cannot be profitable. Our line has been stolen so often that Telkom now refuses to replace it. Telkom appointed a BEE partner to check the lines, but everytime they are in the area, the lines . .more get stolen even more. So we residents are of the opinion that these "guards" are actually in business with the thiefs. Telkom should move away from using BEE as they have not proven that they can be trusted completely. . .less by line gone overnight on November 23 2009, 08:54 Find this comment inappropriate? Report it

Viva Telkom The writer should not show his ignorance and remember it is sometimes wise to keep quite and let people think you are an idiot than open your mouth and remove all doubt it is obvious he is pretty poorly informed and knows nothing about the matters . .more at hand. . .less by Koos on November 23 2009, 11:15 Find this comment inappropriate? Report it

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