Picture: SUNDAY TIMES
Picture: SUNDAY TIMES

Fixed-line operator Telkom will begin a consultation process with labour unions on Wednesday about its plans to retrench 3,000 employees, it said on Tuesday.

“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 group said in a statement. 

Last week, a Telkom spokesperson said the “tough decision” to embark on retrenchments is driven by a weak economic environment and the company’s declining performances in fixed-line voice, fixed-line data — due to migration to mobile data — and organisational and operational efficiencies.

Telkom’s fixed-line data previously made up more than half the company’s gross revenue, the spokesperson said.

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, the company said.

Furthermore, the Centurion-based operator said it has been competing in a mobile market in which the two largest players, Vodacom and MTN, have virtual control over voice and data prices. The group is optimistic that the data services market inquiry will yield firm regulatory action to stimulate competition in SA’s mobile market.

The employees are represented by the Communication Workers Union (CWU), which speaks for 50% of the workforce, with Fedusa, Information Communications and Technology Union, and Solidarity.

The parties have about two months to reach a resolution.

The planned retrenchments could add to the already spiraling unemployment crisis in the country, with unemployment now at 29.1%, and come as Walmart-owned retailer Massmart plans to retrench about 1,440 employees across 34 DionWired and Masscash stores.

Communications and digital technologies minister Stella Ndabeni-Abrahams said she “noted [the plans] with concern” and scheduled an urgent meeting with Telkom’s senior executives last Friday, which her department says “went well”. 

The government owns about 40% of Telkom.

“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,” the group said.

Telkom, which is wrestling with debt of R11.7bn, could save up to 20% of its wage bill of about R10bn if the plan to cut a fifth of its 15,000-strong workforce succeeds.

Update: January 22 2020 
This article has been updated with comment from Telkom.

gavazam@businesslive.co.za