Telkom begins restructure

By Candice Jones for Telkom
Johannesburg, 01 Apr 2009

Telkom's long-planned and contentious revitalisation strategies see their first real steps take place from today.

The new business structure forms part of Telkom's survival strategy in an increasingly competitive telecommunications market. Telkom will now operate under three divisional units: International, Data Centre Operations and the SA business unit.

Nombulelo “Pinky” Moholi was appointed earlier this week as the South African operation's new MD.

Speaking at a media briefing this morning, Telkom Group CEO Reuben September explained the new units begin to take effect as of today.

According to September, the new structures and strategies are being put in place to help streamline the behemoth, which needs to grow business, maintain business and decrease spend to stay in line with SA's telecoms industry.

The imminent unshackling of Vodacom has had industry questioning Telkom's ability to compete in an ever-aggressive African telecoms market. Telkom, along with several industry analysts, have noted that streamlining Telkom will be its hope of endurance.

Working together

Telkom Group CFO Peter Nelson explained at this morning's briefing that the business unit structure will not work independently to help Telkom face the telecoms market head on. He notes the company's capability management, which includes massive cost cuts and eventual outsourcing, will also form part of the solution.

We need to get the people and the business processes right before we think of outsourcing anything.
Peter Nelson, CFO, Telkom Group

The capability management project has had the unions up in arms over the employment of their members. The project was expected to see a large chunk of the business outsourced, which would have affected roughly 19 000 employees, according to the unions.

However, unions noted last week and Nelson confirmed this morning, that the outsourcing has been put on the backburner for now. Nelson came into his position as CFO late last year and, according to September this morning, will be instrumental in the implementation of the new strategies.

Outsourcing reprieve

Nelson explained this morning that long executive discussions led the company to rethink outsourcing immediately. “We need to get the people and the business processes right before we think of outsourcing anything,” he says.

He adds that the company is not intending to outsource as large an amount as been reported. “We will look at those operations that are not essential to our daily business and those that are running well and can be handled by another business.”

More importantly, Nelson explained that Telkom needs to look at cutting costs and has taken a close look at its capital expenditure. He says shareholders will see the total outcome at the company's results presentation expected over the next month; however, the initial cuts have seen the capex budget drop from R55 billion to R47 billion on basic costs.

He expects it to be down to R40 billion in the actual report. He notes this is not a firm figure, but rather an estimate of the kinds of costs Telkom can cut as a business.

The company notes that none of the exco members will receive an increase this financial year. Neither September nor Nelson elaborated on this decision.