Telkom plans to shrug off its monopolistic legacy and become a nimble next-generation telco that will operate through three distinct entities, as it shifts towards becoming an open-access operator.
However, this strategy shift - which the industry views as much-needed and long overdue - comes with casualties, as Telkom will trim its workforce to below 10 000 employees. Telkom's confirmation that it will soon begin another round of job cuts has left unions reeling as they strategise their next moves.
This morning, Telkom spokesperson Jacqui O'Sullivan confirmed the operator would trim a total of 7 800 staff members as it embarks on the next stage of a turnaround plan it started implementing two years ago.
Dubbed "Telkom 2.0", this phase will see the company reduce its net headcount by 4 400 staff through voluntary retrenchments and early retirements.
The telco also expects to "exit" 3 400 staff through outsourcing the skills to external service providers or enterprise development, and is pondering more forced retrenchments. This will leave the company with a core workforce of under 10 000.
Vital move
O'Sullivan explains these job cuts are part of the shift into three distinct business units: retail, wholesale and infrastructure. Telkom alluded to this new business configuration in its results announcement on Monday.
In a statement, CEO Sipho Maseko said Telkom was reviewing its operating model. "A major part of this review is concerned with a deep functional separation between the wholesale and retail businesses, and the establishment of an infrastructure business unit, which will be accountable for network deployment and network efficiency. We believe the separation will remove complexities, allowing for faster solution delivery and encouraging the right business behaviours."
O'Sullivan explains if the company does not change the way it operates, it is not sustainable. She says the turnaround, which is yielding dividends, has until now focused on "low-hanging fruit" such as contract renegotiation and some retrenchments.
However, Telkom's operating model is not suited to the current telecoms landscape and it needs to focus on competition, efficiencies and removing silos, says O'Sullivan. She adds the network has been rehabilitated, but the operator needs to move to a stage where the network is stable and efficient, and needs less people to maintain it.
O'Sullivan says the envisaged "new Telkom" will be more competitive, as well as leaner and meaner. She adds the company has also had discussions about becoming open-access on the back of telecommunications and postal services minister Siyabonga Cwele's recent statement that "government is committed to the establishment of an open-access regime".
Vital change
World Wide Worx MD Arthur Goldstuck says Telkom's current reorganisation is the biggest move since it separated from the post office in the mid-1990s, and shows it is going from a teenager to a grown up. "If they pull it off, it will be a new Telkom. Telkom is now an adult and it needs to start acting like an adult. While it was growing up, it acted like a sulky teenager, but now it seems to have grown up."
Goldstuck notes, however, that the "devil is in the details", adding the unions may attempt to torpedo the shift. He says Telkom needs to follow its plan through to ensure long-term growth and sustainability.
Telkom's split into three units will also allow its network to be used by other players, as it will break the monopolistic hold it has on its assets, says Goldstuck. Telkom needs to be rebuilt from the ground up and remove silos, he comments.
Tim Wyatt-Gunning, CEO of Web Africa, says - in theory - it supports a genuine wholesale model which should lead to Internet service providers being treated equally. "Telkomism runs deep in the culture of both their retail and wholesale teams."
Wyatt-Gunning adds the plans to improve efficiency are also welcome, although he questions whether Telkom can accomplish this without manpower.
Crystal Web director Paul Hjul notes Telkom is in "serious need of reform". He points out that had it made this move five years ago, there would have been fewer job cuts. Had it made the shift a decade ago, when the Internet service providers and civil society were lobbying for a functional split, there would now be more jobs in the industry.
However, says Hjul, the unions are partially to blame for the current job losses as, in 2011, the Communication Workers Union (CWU) opposed local loop unbundling (LLU), which was a disservice to its members. Should Telkom complete its separation and go open-access, there will be no further need for regulatory intervention around LLU, which has been on the cards for several years.
Unions reeling
The unions are unhappy about the latest development at Telkom, with Solidarity spokesman Marius Croucamp saying "trust has been broken". He is worried workers will be casualties as Telkom reorganises, as it looks as if the telco is "killing the old business, not letting it die".
Croucamp adds there will be under 10 000 employees at the operator, and it looks as if further cuts are coming. He notes Telkom wants to reduce its cost base from 29% to 25%, but its current move "goes way beyond that".
CWU president Clyde Mervin would not comment this morning on Telkom's move, noting the union would first meet to strategise around its options.
The South African Communications Union was unavailable to comment this morning.
O'Sullivan says Telkom engaged with organised labour yesterday on the move and will meet with them again next week to discuss the strategy further. "We remain committed to collaborating with organised labour in the best interest of Telkom and its people."