Telkom has begun engaging with unions over its planned retrenchments, with the company planning to cut 3,000 employees in the first phase.
The Information Communication Technology Union (ICTU) has condemned the company’s unilateral implementation of retrenchments, adding that the company has been slowly killing itself with its “hopeless” business strategy.
“Telkom is cannibalizing itself thanks to its high pricing and poor fibre migration strategy,” ICTU media officer Thabang Mothelo told MyBroadband.
Telkom has said that it does not recognise the Solidarity, ICTU, and NUMSA unions, as each of these organisations does not meet the 30% threshold for union recognition at the company.
Mothelo argued that Telkom’s presentation to unions regarding the rationale behind retrenchments was grossly inadequate, considering the company’s failure to implement an effective business strategy.
Pricing and fibre mistakes
“Telkom management claims, without putting evidence of their argument, that technological advancement is the reason for customer and revenue decline,” Mothelo said.
“This position was successfully challenged by the coalition of ICTU, Numsa and Solidarity to the point that specific examples were presented that Telkom has put in place measures to frustrate traditional voice customers, without giving them service and blocking them on the system when they report faulty service.”
These blocked customers then migrate to mobile services or simply to other service providers, he said.
“Another element which Telkom blamed is that competitors prices are flexible because regulators are encouraging competition to the disadvantage of Telkom.”
He said that this is a lazy excuse, as Telkom had a head-start in the fibre race due to its existing ducts and infrastructure, but it still allowed competitors to roll out infrastructure ahead of it in many high-value areas.
Mothelo added that Telkom’s mobile coverage has consistently been the worst in the country, but despite this, the company believes that it can compete with Vodacom and MTN.
“Telkom management hope that their 1.1 million fixed-line customers will blindly migrate to Telkom Mobile when their ADSL is cut off, whilst also hoping to gain lost momentum in FTTH territory.”
“Telkom believes it can compete with Vodacom and MTN, but these two companies have been leading the market for years in network reach, quality, and package pricing, and this is where Telkom is failing dismally.”
The union has also condemned Sipho Maseko’s leadership, stating that under his tenure, Telkom will retrench around 15,000 employees by March 2020 while increasing executive structure by 37%.
Mothelo said that there has been no benefit to previous retrenchments and there will be no advantage to the same type of mass retrenchments now, as Telkom will continue to cannibalize itself and fail to compete with other telcos in South Africa.
Telkom told MyBroadband that is has had to re-evaluate its business due to a struggling economy impacting its revenue and costs.
The company said it has experienced declining performance in the following areas of operation:
- Fixed voice market (which previously made-up more than half of Telkom’s gross revenue)
- Fixed data (due to migration to mobile data)
- Organisational and operational efficiencies
“The decline in fixed voice and data services, and the concomitant decline in revenues, is primarily due to migration to mobile voice and data, as well as fibre, where Telkom is one of the smaller players, both in terms of size, subscriber base and market share,” Telkom said.
“Organisational and operational inefficiencies are linked to the nature of the fixed voice and data legacy. It generally required more staff to install, maintain and market the legacy services.”
“The rapid migration to mobile voice and data services has not been accompanied by a linked agile and flexible organisational and operational adaptation.”
“As a result, our current organisational and operational models are out of sync with the new mobile-focused business,” it said.