No Christmas lunch for Telkom staff as company tightens belt

2013-11-20 16:49

Austerity measures are in full swing at fixed-line giant Telkom, according to Group CEO Sipho Maseko.

At the company’s annual general meeting earlier this year, chairperson Jabu Mabuza announced that the board would not be taking fee increases this year as part of cost-containment measures.

The company this year also embarked on a voluntary-retrenchment process and shed about 1 800 employees.

Maseko said in an interview he was instructing employees to save costs and was also looking at suppliers to absorb some of the rise in inflation.

For instance, Maseko said, Telkom employees were not getting their annual Christmas lunch this year.

Maseko said each employee gets about R200 for the lunch, but with about 22 192 employees as of March 31 2013, Telkom has saved more than R4.3 million by dropping the Christmas lunches.

Maseko also said they were looking to cut costs at management level and to have “fewer management layers, and managers will have to manage more people”, he said.

Maseko also said they would be reducing the capital expenditure and choosing projects carefully.

“What we’re looking at are high-return projects and this will encourage productivity [within the company] because returns are based on productivity. But we’re looking to invest in cloud technologies, convergence technologies and looking at fixed to mobile communications [landline and mobile calls on the same device],” he said.

Maseko’s short-term strategy is to contain costs and once that is stabilised, Telkom will look at aggressively growing the revenue line in the medium term.

One of Telkom’s biggest cash-burners is their mobile arm, 8ta, which was started about three years ago and has only managed to garner 1.8 million subscribers, of which 1.3 million are prepaid.

Maseko is very opaque on the issue of mobile and has only said they want to “derisk” the business – or stem the cost of the mobile operation. He said they were in conversation with various parties around possible options for the future of 8ta.

In their interim results released this week, 8ta’s capital expenditure increased from R521 million last year to R815 million as at September 2013.

Acting CFO Deon Fredericks said this was not a hint on what they were planning for mobile but that they were catching up with what they should have already spent on mobile.

But an analyst said the company has many options to limit the cost of the mobile operation.

“They could change the roaming agreement they have with MTN, or share towers with other parties, particularly with a company like Orange [Telecom] who want a presence in the country and in this way Telkom does not have to bear all the costs,” the analyst said.

While Maseko welcomed the asymmetry in the mobile rates proposal announced recently by telecommunications regulator Independent Communications Authority of SA (Icasa), he said the mobile and fixed termination rates should be the same.

By 2016, to terminate a call on a mobile network will cost R0.10, while to terminate a call on a fixed line will cost about R0.12.

But Maseko was happy with the asymmetry – that the rate operators pay one another is dependent on market share.

“Prices won’t come down if players don’t get that regulatory support. Mobile termination rates should be used as a tool to encourage investment and competition,” he said.

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