Has Telkom jumped the gun?

By Candice Jones for Telkom
Johannesburg, 11 Sep 2008

Telkom's controversial "capability management scheme" starts this week in earnest, with the utility issuing requests for proposals (RFP). However, an insider says the process is a sham.

The scheme, which will allow Telkom to effectively outsource 90% of its operations, has the unions and high-level employees enraged. Industry has questioned the timing of the planned outsourcing, particularly since it runs parallel to Mvelaphanda's R90 billion bid for Telkom.

Group executive for capability management Theo Hess says the company has already received several expressions of interest through a "closed process". Telkom has now moved onto the next phase of the bidding process and issued a request for proposals to bidders, he adds.

Telkom says it hopes to save R1.3 billion per year through its new scheme.

According to Hess, Ericsson, Nokia Siemens Networks, Alcatel-Lucent and Cisco Systems have shown interest in the network operational outsource process. Accenture, Unisys, TechMahindra, HP and Amdocs are interested in information operations, he adds.

Window dressing

A high-level source at Telkom says the entire RFP process is a "smokescreen" as Telkom has already chosen its preferred bidders.

According to the source, HP and Amdocs have close ties with Telkom executives and are only participating in the RFP process as a formality. The source claims HP and Amdocs enjoy preferential treatment from Telkom and will likely win the tenders they are bidding for.

However, Telkom has rubbished this claim, saying there are no preferred bidders in this process.

The outsourcing tenders are speculated to be worth between R5 billion and R10 billion each, although Telkom says no value has yet been set. The fixed-line giant says the process that will quantify the value has only just started and will only show a clear financial figure after it is complete.

Ulterior motives?

Media speculation has it that the outsourcing process may have both a political and business objective.

The source at Telkom alleges executives are trying to get as much out of Telkom as possible before the next administration comes into power. The source believes Telkom management will change under a new government.

Telkom is rushing the outsourcing and sale process to ensure it happens before the elections, the source claims.

However, Hess stands firm that the outsourcing and potential equity deal is transparent and definitely not a hasty decision. "The capability management process is neither rushed nor politically motivated."

Union battles

Meanwhile, Telkom is starting to feel the pressure from unions, particularly the Communication Workers Union (CWU) and the South African Communications Union (SACU), which have both expressed concern about the telco's outsourcing moves.

Solidarity initially exposed Telkom's outsourcing plans and expressed concern over the 19 000 employees that may be affected. However, it has subsequently withdrawn all concerns.

Telkom confirms that CWU and SACU declared a dispute on 26 August. "In terms of the dispute resolution process of the collective agreement on recognition, a written response was given to organised labour on 1 September. A meeting with organised labour was held on 4 September, in which the dispute was discussed and it was agreed that the unions will reply to the company's proposal in writing."

According to Telkom, the negotiations are ongoing.

The company confirms it is taking all possible steps to maintain employees' jobs. "It is important to understand that the employability of Telkom employees is a major objective of this process. As such, potential managed services partners will be required to ensure continued employment at levels equal or better than what Telkom offers currently."