It's actually a bit more sinister than this. The productivity factor is a metric used by the regulator to determine if price increases are justified of not.
The following is an extract from the LINK CENTRE POLICY RESEARCH PAPER
NUMBER 2 - Assessing Telkom’s 2003 Price Increase Proposal: Price Cap Regulation as a Test of Progress in South African Telecom Reform, and E-economy Development.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">According to the Price Cap Model, Telkom’s prices may be increased to cover the expected effects of inflation upon Telkom’s costs of providing its fixed network services, but must be decreased to cover expected improvements in Telkom's productivity.
The productivity number used by Telkom, 1,5%, was adopted in 1977 and is remarkably low when compared to numbers used for incumbent telecom operators in other countries. At a similar stage in their telecom reform process, productivity factors typically range between 5% and 10%. Productivity is measured by a combination of capital investment and labourproductivity. New technologies are providing Telkom with continuous major improvements in productivity on the order of 10% per annum or higher. The standard used by Telkom and other operators around the world for judging labour productivity is the number of main lines subscriber per employee. Due to major reductions in its workforce in recent years, Telkom’s main lines per employee productivity has improved dramatically, including 11% in fiscal 2002 for its fixed network and 29% for its mobile investment in Vodacom. Telkom plans a further major reduction in its work force in 2003 promising even greater gains in labour productivity. The evidence suggests that an achievable overall productivity improvement figure on the order of 11 - 13% for Telkom in the Price Cap calculation would leave ample opportunities for additional productivity gains for Telkom to realise as increased profit. Under any realistic application of the Price Cap Model, one would expect a price reduction by Telkom for 2003, on the order of 5 – 10%, not a price increase.<hr height="1" noshade id="quote"></blockquote id="quote"></font id="quote">
So if they can't get away with it anymore why not cull off some of the workforce to reduce payroll costs and counteract the effect of a lesser tariff increase in the future...
I'm no expert but that is what it looks like to me....
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