New round of job cuts at Telkom

Telkom will embark on a fresh round of staff reductions to cut costs. The company on Thursday said it will offer voluntary separation and early retirement packages to employees beginning on Friday, 14 September.

News of the latest round of planned job cuts comes just weeks after Telkom CEO Sipho Maseko warned in an interview with TechCentral of a “jobs bloodbath” at the partially state-owned telecommunications operator if communications regulator Icasa went ahead with planned new call termination rate regulations. The new regulations are meant to come into effect on 1 October.

Telkom has not said how many employees it hopes to cut through the new round of voluntary separations. Only qualifying employees will be entitled to apply for the packages, presumably to ensure Telkom doesn’t lose key skills through the process.

“The cumulative effect of past regulatory decisions has resulted in Telkom subsidies of approximately R70-billion to South Africa mobile operators,” the company said in a statement on Thursday. “Telkom has implemented multiple initiatives to ensure its continued competitiveness in this context. A primary concern during this process has been to safeguard jobs from market and economic pressures.”

Last month, in the interview with TechCentral, Maseko severely criticised Icasa over the proposed new call termination rates.

The draft regulations appeared to “target” Telkom and give a softer ride to the industry’s biggest players, MTN and Vodacom, Maseko said.

“Icasa’s mandate is to promote competition in this sector … by addressing market failure and thereby reducing the cost to communicate. But their decision does the opposite,” he said. The sharp reduction in the rates – which operators charge each other to carry calls between their networks – coupled with reduced levels of “asymmetry” favouring smaller market players could force Telkom to cut its workforce by as many as 10 000 people, Maseko said. Telkom currently has an 18 000-strong workforce.

‘Aggressive challenger’

“Telkom has been the aggressive challenger in the market. We have invested in the network, we’ve reduced prices, we’ve offered dramatic improvements in value for money for customers. Telkom is the primary agitator in the market, bringing down the cost to communicate for South Africans. Despite this, the call termination rate decision hits Telkom much harder than the other mobile network operators,” he said.

Under the draft regulations, Icasa has proposed a further “glide path”, with the termination rates reduced on mobile and fixed lines to 12c/minute and 8c/minute respectively from October 2018. It wants them cut to 10c and 5c in October 2019 and to 9c and 3c from October 2020.

There will continue to be “asymmetry” in the rates. The asymmetry (or difference in price) for mobile services is proposed to be set at 5c/minute from October 2018 to September 2020 and 4c/minute from October 2020 onward. Asymmetry for fixed services is proposed to be 1c from October 2018 to September 2020 and fall away completely from October 2020.

“Icasa is proposing that fixed termination rates should fall by 70%, with a reduction of 31% in mobile termination rates,” Maseko said. “What is strange is the mobile asymmetry, which supports new entrants, is also being reduced. Icasa’s decision on call termination rates penalises Telkom, rather than the larger mobile operators… This is a missed opportunity to reduce the cost to communicate for the large majority of South African telecommunications users.”  — © 2018 NewsCentral Media