Time to cut Telkom loose

Judging from the questions raised by members of Parliament when Telkom presented a report to government yesterday, it could be time for government to cut itself loose from the telecommunications utility.

Telkom CEO Sizwe Nxasana found himself fielding questions about a range of issues affecting the group during his annual report presentation before the Parliamentary Portfolio Committee on Communications.

While Nxasana was well prepared for questions about plans to retrench about 4 000 employees over the next three years and Telkom`s corporate social responsibility programmes, the news that one of the major shareholders had cut a deal to sell its stake turned up the heat a little.

But Nxasana, a chartered accountant by profession, remained calm and provided full answers to all questions. Naturally, a top-flight team of executives helped him prepare his answers, but he still managed to avoid becoming hot under the collar as he fielded questions and statements, many of which had clear party political agendas.

Government owns 38.3% of Telkom`s shares and has the right to appoint the majority of the board members. The Thintana consortium, consisting of US telecoms group SBC and Malaysian Telecom, has 15.1% after selling half its stake earlier this year.

Some may cry foul about this tactic, but the fact remains that any prospective licensee would have to prove its transformation intentions.

Paul Vecchiatto, journalist, ITWeb

Opposition parties were quick to latch on to the negative implications of the latest deal. For instance, the consortium that will buy out Thintana`s estimated R6 billion stake is headed by Andile Ngcaba, the former Department of Communications director-general and now chairman designate of Dimension Data SA. It also comprises Smuts Ngonyama, the ANC`s spokesman.

The official opposition, the Democratic Alliance, was quick to point out that the new shareholder could pose conflicts of interest. The tiny Freedom Front+ pointed out that the retrenchments were not in line with the ANC government`s official policy of job creation.

It was clear the committee`s ANC members were uncomfortable with the contradictions between the official policy of job creation and the fact that a government-controlled company was retrenching staff.

Several ANC members asked questions and made statements regarding the role technology played in these job losses. They also asked about the affordability of Telkom`s services and the threat posed to it by companies, mainly Internet service providers (ISP), and voice over Internet Protocol (VOIP), in a liberated environment.

The issue of "fronting" - Telkom suppliers that are not genuine black empowerment companies - was also raised.

Nxasana had the answers to all these questions down pat. Conflicts of interest with the new shareholder were for it to sort out and he saw business opportunities, with some kind of alliance with Dimension Data.

Job losses were an inevitable part of technological upgrading and one of his executives said the trade union, Solidarity, which was making the most waves about it, was on a public relations and membership recruitment exercise.

Responding to the threat posed by the ISPs, Nxasana said: "One must remember that the ISPs are not transformed. This latest deal makes Telkom a company that has transformed with a substantial BEE stake."

This statement is important, because as ISPs and others begin applying for licences to establish VOIP services, Telkom could oppose them, either through direct or indirect lobbying, stating that these companies do not meet transformation criteria.

Some may cry foul about this tactic, but the fact remains that any prospective licensee would have to prove its transformation intentions. It also leaves the option for Telkom to refuse to connect them if it feels they do not meet such requirements.

Nxasana was also adamant that Telkom took fronting very seriously and would not hesitate to cancel contracts with companies found doing this.

So it is probably time for government to reduce its stake or get out of being a Telkom shareholder entirely.

This would free it and its members of Parliament, to ensure the country`s only fully licensed telecoms utility plays fair and delivers on its promises of improved service delivery and upgrading its network.

There will no longer be the uncomfortable situation of policy contradictions, because government will no longer be the judge and jury. This will be good for foreign investors who will then have the confidence to invest in other telecommunications ventures, not least of all, the still-to-be-born second national operator.