Telkom CEO Sipho Maseko. Picture: MOELETSI MABE
Telkom CEO Sipho Maseko. Picture: MOELETSI MABE

Telkom will meet labour unions to discuss the possibility of job cuts should the partially state-owned network operator fail to persuade regulators to back down on proposed changes to call termination rates.

The Independent Communications Authority of SA (Icasa) wants to lower termination rates — also known as “interconnect” fees that telecoms operators charge each other for carrying calls on their networks. — from October 1.

Of concern to Telkom, which is 41% state owned and has SA’s biggest fixed-line network, is that Icasa wants to slash termination rates for fixed-line operators from 10c to 3c by October 2020, while mobile termination rates would fall by only 4c, to 9c.

While no job cuts were imminent, Telkom CEO Sipho Maseko said the operator would meet the Communication Workers Union and the SA Communication Union on Tuesday, as retrenchments “will be one of the options on the table” if Icasa did not budge.

If effected, the changes would be “a calamity, a big problem, and we’d rather have that conversation with organised labour now rather than later so that all are on the same page”.

Asymmetrical termination rates, whereby fixed-line operators effectively “subsidise” mobile players, were first used in the 1990s to stimulate the growth of mobile services and break Telkom’s monopoly in the telecommunications space.

According to Maseko, the asymmetrical pricing structure should have been abandoned around 2000 when Telkom, MTN and Vodacom were all about the same size.

Instead of continuing to “entrench the duopoly” of its larger rivals, Telkom wanted Icasa to equalise fixed-line and mobile termination rates and then lower these fees at the same rate.

Maseko said that in the two decades to 2014, Telkom paid about R70bn more in termination fees to Vodacom and MTN than it had received in return. Over that time, its workforce fell as interconnect fees were gradually reduced.

“I think that probably 15 or 20 years ago, Telkom employed give or take 40,000 people.” Today, it had about 18,000 staff while mobile-focused MTN and Vodacom employed about 10,000 people between them, despite being far larger companies. “So we need to understand, with a termination rate structure like this, how we will still be able to operate profitably.”

Telkom would also have to review its office footprint, whether it could afford to carry on providing services in rural or “uneconomic” areas, and whether it should scrap its unprofitable public phones unit.

“If we lose because our products are cr*p, or because our service is cr*p … one can live with that. But if we lose because the fundamental design of the playing field is … skewed against you because of the regulatory structure, it effectively means we’ve got to go to the drawing board,” said Maseko.

MTN and Vodacom said they were reviewing Icasa’s proposals. The regulator did not respond to requests for comment.