See update at the end of this article…
Telkom SA SOC is seeking to cut its workforce to about 8 000 by July, an approximate 40% reduction, in an effort to trim costs at Africa’s biggest fixed- line phone company, an internal document shows.
The company, about 39% owned by South Africa’s government, has identified 6 250 positions that it wants to eliminate from a total workforce of 13 895 as of January 29, according to a plan known as Project High Ground outlined in the document, which was obtained by Bloomberg and verified by Pretoria-based Telkom. The reductions will come from outsourcing 3,750 positions to other companies and moving a further 2 000 to Business Connexion Group, which it bought last year. In addition, 300 jobs may be cut, revised downward from 500 in the original document, spokeswoman Jacqui O’Sullivan said by phone.
“To secure the future sustainability of Telkom, we have to take serious actions to manage the very difficult environment within which we operate,” spokeswoman Jacqui O’Sullivan said by e-mail on Monday. “Data prices continue to drop while demand grows and we face all of this with a cost base that is not aligned to local competitors and global trends.”
Under chief executive officer Sipho Maseko, who took the helm almost three years ago, Telkom has been cutting jobs and reducing operational costs to revive revenue hit by the decline in landline use. The company has been investing in its mobile- phone service. Data-revenue from the unit increased 56% in the quarter ended December 31 from the year before, compared with a 5% decline in the larger fixed-voice business.
Telkom’s employee cost-to-income ratio is about 24% and the company wants to reduce that to 16 percent, the industry average, it said in the document. The company’s workforce is 69% male with an average age of 44, the document shows. O’Sullivan said some changes have been made to the plans since the document was written, without giving further details.
The company plans to start wage negotiations with remaining employees and labor groups only after the job cuts and outsourcing initiatives are completed, the document shows. The operator will start the talks with a series of “key asks,” including a company-wide wage freeze, new employment contracts with flexible work times, and a restriction to a one-year deal. Telkom expects unions to counter with their own demands, the company said in the document.
“This is a sad state of affairs,” Clyde Mervin, president of the Communications Workers Union, which represents the most Telkom workers with about 38 percent of the workforce, said by mobile phone. “We understand Telkom’s financial difficulties, but believe there are other options. We want to look at how workers can be used elsewhere. This needs to be investigated.”
The shares gained 0.6% to R53.33 as of 1:22pm in Johannesburg, valuing the company at R28.1 billion ($1.7 billion). The stock has declined 18% this year.
“We met with the CEO late last week and he said nothing of this,” Marius Croucamp, a spokesman for Pretoria-based union Solidarity, said by phone. “Telkom is cutting jobs, but unable to sustain service levels. It’s being reckless with job cuts.”
The operator has cut more than 4 200 jobs in the fiscal year that will end March 31 through voluntary severance packages and outsourcing, reducing the workforce from 18 333 employees at the end of the previous fiscal year.
Telkom revenue fell 2.5% to R31.7 billion in the year through March, the fifth consecutive year of declines. The company told employees on February 25 it plans to cut 300 head-office jobs and outsource a further 254 to a separate company as one step of the initiative.
©2016 Bloomberg News
Following the publication of this article, Reuters reported:
Telkom said on Monday no decision has been made to cut its workforce by about 40 percent this year as it seeks alternative ways to reduce labour costs as part of a turnaround strategy.
Bloomberg reported on Monday that Telkom has identified 6,250 positions that the company wants to eliminate by July from a total workforce of 13,895, according to a plan known as Project High Ground outlined in a document.
“The document has changed quite a bit since then. No decision has been made and it is therefore premature to speculate on the possible outcome when analysis is still underway,” Telkom spokeswoman Jacqui O’Sullivan told Reuters.
The company, in which the government owns a stake of about 40 percent, said on Friday it plans to cut at least 300 jobs at its head office and further outsource 260 jobs to cut costs.
Telkom is nearing the end of the first phase of a turnaround strategy that includes cutting jobs, outsourcing services such as telephone directory printing and selling some properties.