The Congress of South African Trade Unions (Cosatu) condemns the proposed deal between Telkom and the Korean Telecom (KT) Corporation, since it's a step towards Telkom's privatisation.
The fixed-line operator on Friday said it is in talks to sell a 20% stake to the Korean company, which could dilute government's 38% stake, freeing it up to be more competitive.
Telkom's market capitalisation is currently R16.7 billion, potentially valuing the deal at more than R3 billion. However, Telkom says it will issue more shares to KT should the deal go through, which will dilute government's current stake.
The federation says it has consistently opposed the privatisation of Telkom.
Job cuts
It highlights the important economic benefits of ensuring basic telephony for all South African households.
“The results of commercialising Telkom, however, have been - as in most countries that privatise telecommunications - increasing costs for poor users and lower costs for business and the rich, relatively slow improvement in access and job losses.”
It adds that in 2001, when the commercialisation of Telkom was under way, there were 17 000 jobs lost in three years. That was almost a third of the company's total employment, and so in those three years, Telkom accounted for over 2% of job losses outside the public service, according to Cosatu.
“Ten years later, Telkom is still trying to cut jobs, though disguising this process as offers of 'voluntary severance packages', which the Communications Workers Union (CWU) is rightly discouraging workers from taking, as a matter of principle.”
Soaring charges
Cosatu says the restructuring of Telkom has been associated with declining services for the majority of SA's people.
“According to the government's own statistics, in the October Household Survey, in 1999 less than a third of African urban households and less than one in 10 African rural households had telephones, compared to over 80% of rural and urban whites. The level of telephone connections in African areas had fallen since the previous year.”
It says soaring rental charges for telephones is what places them beyond the reach of people.
“We should not be surprised at this kind of result from privatisation... After all, private companies must seek to maximise their profits. No matter what the broader social gains would be, they can't afford simply to give services to the poor. After all, no men or women open a business to meet challenges of poverty, unemployment and/or to provide services to the people.
“Telkom stands out as an example of what can go wrong in privatisation. They have reversed all the gains they previously made as a public entity, and the poor have gained nothing out of this process. Privatisation in Telkom has followed the classic path: worse services for the poor, high job losses, and improvements only for business and the rich.”
Lagging behind
Government's 38% shareholding in Telkom has long been a bone of contention as the state has been accused of interfering with Telkom's strategy, which analysts have argued drove away key talent such as former CFO Peter Nelson.
Telkom said it is in talks with KT around a “potential strategic venture” that could lead to a long-term agreement to “formalise the relationship and identified areas of mutual strategic and business co-operation”.
Strategy Worx MD Steven Ambrose notes that KT will inject fresh ideas into Telkom and provide it with the impetus to innovate. Telkom has been accused of lagging behind the times and failing to introduce exciting new products. It has also been blamed for stifling broadband innovation.
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