Telkom's bid to streamline its management layer "is an imperative for the survival of the business into the future and its success".
The group explains it has underperformed for several years as its share of market in fixed-voice and data continues to decline and fixed-to-mobile substitution has intensified competition. "The fixed voice market makes up more than half of Telkom's revenues, and is in decline."
In the year to March, the group reported flat revenue of R32.5 billion and net revenue dropped 0.4%, to R26 billion. However, its bid to remove costs is paying off somewhat, as operating expenses declined 2.1%, and operating income for its core business gained 3.8%.
Telkom says it aims to "build the right organisation for the future by improving the business performance and unlocking efficiencies. The company will continue to explore other avenues that can assist with cost reduction in all areas of the business." It considered several options before embarking on a retrenchment process, including voluntary separation and early retirement options, expanding and diversifying revenue base, reducing costs and divesting from non-performing investments.
The telco notes, throughout the entire restructuring process, it has consulted with all stakeholders including representative labour unions to ensure the facts are "consistently" communicated. It has indicated it needs to cut its management layer by about 25%, which is about 650 people.
Targets
It says: "Allegations that Telkom will target 9 500 employees in the next six months are also unfounded." This is in response to several media reports today indicating it will lay of almost half its workforce.
Telkom adds it is not targeting specific numbers of individuals, rather aiming to reduce the number of management layers and achieve an employee cost:revenue ratio of 25% over the next five years. Staff, at just over 19 000, account for 30% of revenue.
"The objective is to bring leadership closer to customers by removing unnecessary layers of management, which will improve customer service and experience. Alternatives such as outsourcing and joint ventures may also be explored as part of the business and organisational restructure in the future."
Telkom also says race is not a criteria, responding to Solidarity's pending legal action to force it to not retain staff based on race. The telco says its focus is on retaining the right skills for its turnaround strategy and it will consider several criteria throughout its restructuring process.
The criteria include qualifications and experience; the employee's potential; the last in, first out principle when more than one employee qualifies for appointment into the same position; and employment equity.
"It is important to note that employment equity is only one of the four criteria applied to this process and that Telkom, as any South African company, is required in terms of the Employment Equity Act to comply accordingly."
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