Tight margins: Jonas Bogoshi, CEO of Telkom’s BCX, says the recession will weigh on major target sectors for ICT firms.. Picture: JEREMY GLYN
Tight margins: Jonas Bogoshi, CEO of Telkom’s BCX, says the recession will weigh on major target sectors for ICT firms.. Picture: JEREMY GLYN

Telkom subsidiary BCX will retrench about 700 employees following weak financial performance.

The technology firm’s CEO, Jonas Bogoshi, said that the trading conditions were still difficult. BCX had come under pressure when large enterprises in both the public and private sectors held off on spending on ICT because of the slowing economy. About 35% of BCX’s revenue is from the public sector. 

 “Our business has been severely impacted by the technical recession. We expect the reduction in IT spend that we have seen to continue as our customers look to find ways to protect their own profitability,” he said.

Large and medium-sized entities represent 37% and 26% of BCX revenue, respectively.

BCX said on Thursday it entered a formal consultation with its trade unions and the Commission for Conciliation, Mediation and Arbitration (CCMA) on the possible retrenchment of about 10% of its 7,489 employees.

News that the enterprise focused BCX was seriously looking at reducing its head count first emerged in September, and followed Telkom reporting a 19.2% fall in pre-tax profit to R3.15bn, in its results for the year to end-March.

Telkom said at the time the weak economy had a severe impact on BCX’s performance, which had seen revenue fall 4.1% to R21.1bn, and earnings before interest, tax, depreciation and amortisation (ebitda) shrink from R4bn to R3.7bn.

Bogoshi joined BCX in April as COO and became CEO in June, following the resignation of Ian Russell. 

BCX said yesterday it was commencing a CCMA-facilitated consultation process and that it had served a Section 189 notice on all registered unions that represent its employees. The unions include the South African Communication Union (Sacu), the Communication Workers Union (CWU),  Solidarity, the Media Workers’ Association of SA (Mwasa), and the National Union of Metalworkers of SA (Numsa) .

The announcement on the retrenchments comes after the resignation of BCX’s CFO Refilwe Nkabinde, and COO Michael Buttner, who had joined the group at the time Bogoshi did—  in August.

The news also comes three months after Telkom said that it was looking at offering voluntary separation and early retirement packages.

Telkom CEO Sipho Maseko said at the time that it had to consider this option because the reduction in the interconnect fees, the rate that telecoms operators charge each other for carrying calls on their networks, by the Independent Communications Authority of SA was too steep.

With 18,000 employees Telkom has long been described as having too large a head count for a company of its size. On Thursday, Telkom said it would roam on Vodacom’s network from June 2019 when its similar agreement with MTN expires. The deal will boost Telkom’s coverage and provide 4G internet network to millions of its subscribers. 

Telkom’s half-year results are scheduled to be released next week. The group’s share price closed about 1% up to R55.64 with 927,061 shares traded in 1,483 deals.