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Openserve technicians leave en masse as Telkom’s job cuts bite

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 23 Mar 2020

Telkom’s business unit Openserve will be the hardest hit by the job cuts the telecommunications company announced earlier this year.

So said Telkom spokesperson Noma Faku, in an interview with ITWeb last week to discuss Openserve’s business strategy.

Openserve is the wholesale business unit of Telkom, and provides wholesale products and services to other licensed telecommunications service providers through an open access network.

According to Faku, Openserve’s network modernisation from copper to fibre means many technicians will no longer be needed at the company, as fibre has fewer faults in comparison to the legacy copper network.

Openserve will see leadership changes at the end of this month, with long-serving CEO Alphonzo Samuels leaving the company.

Samuels will be replaced by Althon Beukes, Telkom’s group chief information officer.

In January, the financially-constrained Telkom announced 3 000 jobs will be cut at the company. This is not the first time it will reduce staff numbers, as it has been offering voluntary retrenchment packages since 2015 in a bid to reduce its wage bill.

Voice woes

Telkom has been facing challenges with declining revenues in fixed voice and fixed data services over the years.

Hurt by reduced voice revenues, Openserve prioritised modernising its network.

Earlier this month, Telkom said job cuts will cost the company a whopping R1.5 billion. After commencing phase one of a two-phase restructuring process, the operator said the restructuring process followed the technological shift to fibre, LTE/LTE-A as new sources of revenue, notwithstanding lower margins.

Telkom is also selling off more of its properties, saying the proceeds will be used to modernise the company’s network.

In regards to the job cuts, Faku said: “The number that we were consulting on was around 3 000. We opened voluntary packages and the people who volunteered going through the retrenchments discussions was in the vicinity of 2 300 and the bulk of them came from Openserve.

“This is because if we just look at the fault rate, for instance, between a copper network and a fibre network – it is significantly lower on the fibre network than the copper network.

“So we will not need as many technicians to service the network. So the bulk of the number of those we are consulting with are from Openserve, as well as Yellow Pages and the consumer business.”

Faku noted Telkom has invested very heavily in its network. “Looking back, our network was largely copper-based and part of the investment was the migration to fibre. The idea was that with copper, we had a quite huge fault rate and that fibre was a new and emerging technology.”

5G readiness

The other rationale was that Telkom needed the fibre backhaul to be able to cater for the higher volumes that 5G will bring, said Faku.

She pointed out it was a mixed strategy around modernising the network infrastructure for improved customer service on the fixed-line side and also as part of a broader 5G readiness plan.

“This is because we expect significantly higher numbers of traffic on 5G and that’s why we are modernising the network.

“We have already developed a 5G network as part of the network modernisation investment because the assumption was that if you look at the amount of data that you transport on the current network – how it changed with the coming of over-the-top players and technologies like the Internet of things – the assumption was that we will have significantly higher amounts of data traffic. Thus, we started building our network towards that direction.

“For us, this is an evolution of the network rather than a ‘switch off and switch on’ process. The migration of copper was kind of one part of it. But the investment is ongoing.”

Strong competition

Regarding the competition the company is facing from new fibre entrants like Vumatel, Faku said: “Vumatel only works in the households environment, whereas the bigger part of the Openserve traffic is not the traffic that comes to your house. It’s the backhaul traffic. That’s where we make a significant amount of money.

“In terms of fibre-to-the-home (FTTH), the numbers might be different (with Vumatel) but if you look at backhaul fibre, which is actually what you need to create a much stronger 5G network, we are far superior.

“We have built this network in advance of demand so we are certain that amid the outbreak of the coronavirus and an expected surge in data traffic, the network will be up to it.”’

On the FTTH front, Faku said Openserve has undertaken a number of initiatives; for instance, the movement of current consumers from the old copper network to fibre.

Openserve’s consumer business also has a quite strong value proposition around converting to FTTH, she said.

“We are looking at options on how to penetrate other markets that are not necessarily the highly concentrated markets. We are looking at models that can work better in those areas.

“What’s interesting is that after we went into Soweto and laid the fibre, Vumatel then came in afterwards. So we are looking at areas where there are commercial strengths because people have become far more mobile,” Faku noted.

Telkom will announce its financial results on 25 May.