Telkom CEO expects backlash from staff over cost cuts

2014-01-10 16:14

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Telkom CEO Sipho Maseko said his hiring of management consultants Bain & Co, and planned cost cuts, are facing opposition from staff as he seeks to turn around Africa’s biggest fixed-line phone company.

Maseko plans to fire as many as 1 000 managers and says he needs to cut the approximately 21 000-strong workforce by almost a third over five years.

The decision follows a contract with Boston-based Bain agreed about a week after he started at Telkom. The phone company is 40% owned by the South African government and 11% held by the Public Investment Corp, the company that manages state pensions.

Telkom shares rose as much as 3.9%.

“I’ve cancelled all the bottled water, people are not happy; I’ve cancelled Christmas lunches, people are not happy,” Maseko said in an interview. “They’ll be saying that some of the proposals around cost cuts are too aggressive.”

Telkom, which has had five leaders since 2007, is struggling to revive revenue among consumers in a country that has leapfrogged fixed-line technology in favour of smartphone devices that are driving a boom in data usage across Africa.

The company is in talks with competitors to share infrastructure at its wireless business, the smallest of South Africa’s four licensed operators, to help curb costs.

The cost of running the mobile business is “a drain,” Maseko said. “If I can get it down by at least 50% that would be fantastic.”

“The human impact will be massive,” Solidarity labour union spokesman Marius Croucamp said in a text message. “If one takes that 30% and calculates the families involved then you get close to 35 000 people who will lose direct financial support.”

The company wants to improve high-speed broadband in Africa’s biggest economy, where average Internet speeds lag behind those of Cambodia and Tajikistan, according to US-based data provider

Maseko is trying to boost revenue and has held talks with media companies including Comcast Corp, Bertelsmann SE, Naspers Ltd and Netflix Ltd about using Telkom’s fixed-line networks to deliver content in Africa.

“I’m accountable for the strategy, I’m accountable for the development of the strategy,” Maseko said. “If the strategy fails, I’m the one who’s going to get shot. It’s me.”

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