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Telkom downplays store closures

Martin Czernowalow
By Martin Czernowalow, Contributor.
Johannesburg, 17 Oct 2014
Telkom CEO Sipho Maseko wants to shut down unprofitable outlets across the country, to speed up the group's cost-cutting plans.
Telkom CEO Sipho Maseko wants to shut down unprofitable outlets across the country, to speed up the group's cost-cutting plans.

Telkom this morning downplayed comments made by its CEO, Sipho Maseko, who was recently quoted in the media as saying the company is looking to shut down unprofitable outlets across the country, to speed up the group's cost-cutting plans.

Speaking to Bloomberg, Maseko stated Telkom has about 1 500 stores, of which 50% are losing money. "Every store at a minimum needs to sustain itself, break even and cover its own costs," he said. "If it's not profitable, we can't keep it."

However, in response to questions from ITWeb, Telkom painted a far vaguer picture of the situation, refusing to be drawn on details and offering a vastly different number of stores than that mentioned by Maseko.

"As previously communicated, cost-cutting initiatives at Telkom are being investigated and applied across all divisions in the company. With regards to Telkom's owned and operated stores, much work has already been done in terms of evaluating and reviewing this end of the business; however, no finalisation has been reached as yet," the company says.

"As part of this exercise, alternate direct channel strategies, such as franchising the physical retail stores, is under consideration."

According to the company, Telkom's current store portfolio consists of 95 company-owned and operated stores and 42 exclusive dealer stores. This figure falls inexplicably short of the 1 500 mentioned by Maseko in his Bloomberg interview.

Telkom did not confirm how many of its outlets are loss-making, nor would it reveal how many staff members it employs at store-level and how many would potentially be affected by store closures.

Limited job cuts?

Meanwhile, trade union Solidarity says it is aware of Telkom's plans to shut down unprofitable outlets across the country, but adds no retrenchment notices have been issued yet.

According to the head of the communications industry at Solidarity Marius Croucamp, Telkom has already briefed the unions on the proposed closure of loss-making stores, but no time frame has been given for this process to start.

Croucamp reveals potential job losses could be limited to an extent by the telecoms giant's decision to implement strategies such as franchising physical retail stores. "We were told that Tekom would close some stores and outsource others. In the case of outsourcing, jobs could be saved."

He adds Telkom "obviously finds itself in a difficult position", as store profitability needs to be weighed by against service delivery to the public. "Not all stores can be profitable, but not all stores can be closed either. That would be taking away entirely Telkom's ability to provide service to the public in some areas," says Croucamp.

At this stage, the union could not comment on when the potential closures would begin, as no notice has been given by Telkom.

Solidarity remains vigilant

Solidarity also states it will keep a close watch on Telkom's ongoing retrenchment process, adding it will act swiftly should its members be negatively affected. Telkom earlier this week refused to retract termination letters issued to 105 employees - 16 of whom are Solidarity members - who have not been placed in alternative positions.

According to Croucamp, Telkom is currently conducting a process to place employees, affected by the retrenchment process, in alternative positions. "Should some of our members be forcefully retrenched, we will attend to each case individually. Solidarity will, therefore, consider taking legal action if we find it necessary," Croucamp said.

Approximately 676 employees affected by Telkom's section 189 retrenchment process have been placed in alternative positions within Telkom, while 302 employees took voluntary severance packages.

Telkom's need to restructure comes as it seeks to cut costs and streamline its operations. In total, Telkom stated it would seek to cut about 2 500 managers over all three phases of this process, but a large part of effected employees could be placed in new positions.

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