Telkom's proposed salary hike of 1.5% has angered unions, leading to a stalemate and a dispute being lodged with the Commission for Conciliation, Mediation and Arbitration (CCMA) and a looming strike.
The offer comes at a time when Telkom is trying to cut costs through a voluntary retrenchment and early retirement process, and points to financial difficulties at the company.
Unions are unable to stomach the proposed offer, because some of the staff who had taken packages have returned on a contract basis, which the unions argue makes a mockery of Telkom's bid to cut costs.
Telkom and unions have been in wage talks since March and, after five rounds, have been unable to reach a settlement. Two years ago, a threatened strike was narrowly averted, when a last-minute offer from Telkom brought five months of salary negotiations to an end. Telkom's current two-year agreement with unions expired at the end of March.
No money
The Communication Workers Union (CWU) is demanding 11.5%, down from its initial 12%, while the South African Communications Union (SACU) has asked for 9% and Solidarity wants 8.8%. Telkom's initial offer was 1%, and the telco says it remains committed to continuing to engage with unions.
However, Telkom says its affordability does not allow for it to offer an increase that is in line with inflation, which is currently 5.8%. As a result, all three of the unions, representing about 13 998 of Telkom's 20 000 employees, have referred a dispute to the CCMA, although a hearing date has yet to be set.
Solidarity spokesman Marius Croucamp says the offer is unfair, although unions are aware Telkom is experiencing financial difficulty. He says the parties spent 12 days negotiating to get to 1.5%. "It's going backwards. In real terms, the buying power of our members decreases."
Currently, other companies are offering wage increases of 7% to 8%, and Solidarity believes Telkom can offer more than 1.5%, says Croucamp.
Croucamp says the union will submit any reasonable offer from Telkom to its members. He adds that a strike is a possibility, although one has not been mandated by members yet.
CWU spokesman Dennis Morobe says a strike is looking increasingly likely, especially if a realistic offer is not made at the CCMA. He adds that the union is still open to negotiations. "Everyone is annoyed."
SACU president Michael Hare says the offer is "disgusting" and "pathetic", especially as he has heard Telkom has offered some senior managers 3%, and has reemployed some of the retrenched workers as consultants. He says it is inevitable that there will be a strike.
In March, Telkom said it was offering voluntary severance and early retirement packages from 15 March to 31 August, before embarking on a retrenchment process, if necessary. The group made the offer in a bid to cut down on staff costs.
Thami Msubo, Telkom's chief of human resources, said at the time there is an "urgent need" for Telkom to address its human capital requirements, which impacts substantially and directly on the company's cost base.
A Telkom briefing, which has been uploaded onto Solidarity's Web site, says staff costs are approaching a third of total costs. It notes the comparative figure for other fixed-line operators is below 25%.
Charade
Croucamp says more than a thousand Telkom employees have taken voluntary packages, but then some staff return on contracts, and - in some cases - are paid more than previously. He says this does not make sense and makes it more difficult for the unions to stomach a 1.5% wage increase offer.
Former Telkom staff returning on contract makes a mockery of Telkom's bid to save costs, says Croucamp. He notes the company should have done a proper cost-saving evaluation and looked at everything, including aspects such as stationery and catering.
Morobe says bringing back staff as consultants is a waste of money and does not aid Telkom in cutting costs.
Telkom says a limited number of employees, who left through the voluntary process, have been asked to keep working on contract for up to three months to make sure crucial projects, that are near completion, will rollout as scheduled. "Most of these projects reside within the company's consumer division and others are part of Telkom's network transformation programme."
The operator says applications were evaluated in order to assess the impact on operations before a decision was made. The short-term contracts allow it to successfully complete "crucial projects".
Hare says about 1 500 staff have taken packages, which is costing Telkom money when it continues to argue that it cannot afford to offer more than 1.5%. Two years ago, the operator spent about R1.2 billion on voluntary separations and indicated this would save it R2 billion, he adds, questioning where the saving has gone.
Telkom has invested heavily in its next-generation network and rolling out its mobile arm, and has the capacity to increase its debt, comments Hare. He says the argument that it does not have money does not hold water. "We'll stick to our guns."
Worrying sign
Ovum analyst Richard Hurst says Telkom has to do more with less. "I wouldn't say their backs are against the wall, but it's a hard battle for them in terms of resources; financial and otherwise."
Hurst points out that Telkom's trading update, which said headline earnings per share would be at least 20% lower for the full year, indicates it is not all "sunshine and roses" at the company. The only way out for Telkom is an equity partner, he notes.
Africa Analysis telecoms analyst Dobek Pater says the 1.5% offer indicates Telkom's financial position, which has been on a downward trend, is weakening. Telkom's results for the year to March will be published on 14 June.
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