Telkom blames distorted market for sweeping job cuts

Telkom has blamed the dominance of Vodacom and MTN as well as “fundamental changes” sweeping South Africa’s telecommunications industry for its decision to let go of as many as 3 000 employees, or about 20% of its workforce.

The weak economy has only added to the need to cut jobs, it said in a statement on Wednesday.

“Besides the difficult macroeconomic environment confronting all companies operating in South Africa – where GDP per capita is declining because economic growth is lagging population growth – Telkom is having to reposition itself amid fundamental changes within the telecommunications industry,” it said.

“At the same time, Telkom has seen a sharp decline in fixed-voice and interconnection revenues across the group as customers shift towards new technologies, such as fibre to the home. This trend will continue.”

Telkom also took aim at the dominance of rivals Vodacom and MTN, saying it is “competing in a duopolistic mobile market in which the two largest players have virtual control over voice and data prices”.

It said it is “optimistic” that the Competition Commission’s Data Services Market Inquiry will “yield firm regulatory action to stimulate competition in South Africa’s mobile market”.

‘Will bear fruit’

“Telkom management is confident that ongoing investments in the mobile business and other future growth areas will bear fruit into the future, but the reality is that certain other segments of the business are operating in declining market segments, including the fixed-voice business.

“It is our hope that through considered and constructive engagement with the unions we can present and debate the challenges within our economy, industry and Telkom.”

The company said it will commence a consultation process with organised labour on Wednesday about the job cuts.

The section 189 process is a section of the Labour Relations Act which sets out the guidelines for retrenchment procedures. Telkom approached the CCMA to facilitate the process.

“Rapid changes in technology remain a key challenge for the group. While Telkom has made the necessary investments in new technologies and revenue streams, particularly in the fast-growing mobile business, this has taken its toll on profitability.”

TechCentral reported last week that Telkom had told trade unions that it intended to issue section 189 notices to employees in its wholesale division Openserve as well as in its consumer business.  — © 2020 NewsCentral Media