Telecoms10.01.2014

Telkom to cut workforce by a third: report

Telkom CEO Sipho Maseko is planning to sack as many as 1,000 managers and reduce its workforce by a third over the next five years, according to a report by Bloomberg.

This, amongst other cost-cutting intitiatives, is all in-line with Maseko’s strategy to turn the struggling telco around – a process which he described to Bloomberg as being a “complex transformation”.

According to the report, in addition to its 21,000 employees, Telkom also uses approximately 3,000 contracted employees.

“I’ve canceled all of the bottled water, people are not happy; I’ve canceled Christmas lunches, people are not happy,” Maseko said in the interview.

Telkom Mobile

Maseko said that Telkom’s mobile business was a drain on the company, and the chief executive would be happy to “get it down by at least 50%”.

In November, Sipho Maseko, Group CEO at Telkom, admitted that the Telkom Mobile business was going through “a very difficult time”, and was in discussions with parties over future operations.

Maseko stressed, however, that Telkom would continue to be a full-service operator.

The group was subsequently linked to talks with Cell C and MTN.

Shifting gears

According to the report, Boston-based consulting firm, Bain & Co. signed a R80 million contract with Maseko, shortly after he took up the position of Telkom chief in 2013, to lead the transformation, which the company estimated would take 18 months (October 2014).

In documents seen by Bloomberg and reportedly verified by Maseko, Telkom was described as “severely under-performing” and was in need of a review of its broadband plan, mobile strategy and capital expenditure.

In November, Telkom reported a marginal increase (0.3%) in operating revenue for the six months ended September 2013, to R16.2 billion.

The group pointed to headline earnings per share of 224.2 cents from 101.1 cents in the prior reporting period.

Profit after tax increased 41.1% to R773 million, but earnings before interest, taxes, depreciation, and amortisation decreased 0.4% to R3.9 billion.

Despite its poor performance, Telkom’s shares have been on an upward swing during Maseko’s tenure at the company – increasing 105% since he took up the position on 1 April 2013.

By close of play on the JSE on Thursday (9 January), Telkom shares showed a marginal increase to R30.41, a 52-week increase of 78% from R17.07 recorded on 10 January 2013.