Telkom faces a fine of R3.59-billion - a record for a South African company - if the Competition Tribunal finds it guilty of abusing its market dominance.

The commission said it had asked the tribunal to levy an administrative penalty of 10% on Telkom's annual turnover for its financial year ended March this year.

The telecoms parastatal's operating revenue in that period was R35.9-billion.

Complaints were lodged to the commission at different times between 2005 and 2007 by the Internet Service Providers' Association, MTN's unit Verizon South Africa, Multichoice Subscriber Management Services and Internet Solutions.

The commission found that Telkom overcharged Internet service providers to use its fixed-line network. It did this while keeping its own ISP service charges low.

This allowed Telkom to raise its downstream competitors' costs, making it difficult for them to on-sell to consumers.

The commission found that in 2006 Telkom's prices were more than double the average of South Africa's major trading partners.

It also found that, in 2007, Telkom's prices were 30% more expensive than the average of a basket of 14 countries.

The commission said in a statement there was no doubt that these high prices detrimentally affect consumers and hinder economic development in South Africa.

Denis Smit, managing director of research firm BMI-Techknowledge, said Telkom would challenge the commission's findings all the way.

"Telkom will throw every legal remedy available to them. They will also delay it for as long as possible; it is a long way from being resolved.

"The 10% fine would be a big hit on Telkom even though they are a big company and can absorb this sort of thing. But I would be surprised if they were eventually fined that much. It will be significantly less.

"It is unusual for a fine that size to be levied and would certainly be the highest that the tribunal has given out."

Smit said 10% of annual revenue was the "maximum remedy" that the commission could recommend, but said he suspects a settlement will be reached out of court.

Africa Analysis managing director Andre Wills said if the tribunal did not conclude the case by the end of Telkom's financial year at the end of March next year, Telkom would have to make some form of provision in its financials for the fine.

He said: "It's going to be interesting to see how Telkom management reacts to this, because whatever they do in their provisions will give us and indication of what their thinking is on the case."

On the 10% levy, Wills said it was now up to the tribunal to either ratify, change or reach a completely different decision to what the commission has recommended.

"We are just part of the way through with this case. The Competition Tribunal will start its own process now and when they will reach their decision all depends on what their work load is like," he said.

Telkom did not respond to specific questions posed to it by Business Times, but instead sent a statement saying: "Telkom will prepare its response to the referral in accordance with the relevant rules and procedures applicable to proceedings before the Competition Tribunal."

Telkom's share price dipped more than 3% after the commission's announcement, going on to close 1.68% down at R43.37.