Despite cutting its workforce by around 1 500 staff members in a R753 million voluntary retrenchment and early retirement process, Telkom is still facing a heavy cost base that must be trimmed.
The operator, which has 19 316 permanent staff, aims to cut more expenses internally, and will also put pressure on its supplier base to "eat" into inflation and provide discounts, says CEO Sipho Maseko. He says if Telkom does not cut more out of its cost base, it is in "deep trouble" as its revenue growth is currently flat.
Telkom recently concluded a voluntary retrenchment and early retirement process, which saw its headcount drop 9%. However, normalised operating expenses increased 2.4% in the first six months of the year, despite its staff costs coming down by more than R800 million a year.
Maseko says Telkom aims to end the 2014 financial year with expenses flat year-on-year. He says several areas are being looked at, including the best option for its extensive and expensive property portfolio.
The operator is putting in a multi-year process to cut costs on a sustainable basis, says Maseko. This measure also extends outside of the company, as Telkom will be asking suppliers to "eat" into inflation, he adds.
Telkom is asking suppliers to provide a 15% discount for the next financial year, and another 15% cut in the following year, says Maseko.
Acting CFO Deon Fredericks says Telkom will continue to manage staff expenses. The cost of Telkom's voluntary staff reduction process was among the factors affecting the group's free cash flow for the six months to September. Its free cash flow dropped 97.8%, to R33 million.
The voluntary retrenchment and early retirement process, announced in March, ran until August. Maseko cannot rule out future retrenchments, saying "nothing is off the table".
In the first half of 2010, a similar exercise saw it "voluntarily retrench" 186 managers at a cost of R144 million.
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