Union pleads Telkom case

By Kimberly Guest for Telkom

Johannesburg, 12 Sep 2007

The Communications Workers Union (CWU) is asking US-headquartered Telcordia to consider "important facts" before reaching a settlement with Telkom.

In a statement, CWU spokesman Mfanafuthi Sithebe blames the long-standing dispute between the two parties on Thintana Communications.

The case, which has yet to be settled, dates back to 2001. At the time, the telecoms giant accused Telcordia of breach of contract by not keeping to agreed-upon specifications. Telcordia responded with a counter-claim that stated Telkom repudiated the contract by not accepting the software.

To date, the case and various appeals have been heard by an arbitrator, the Pretoria High Court, the Supreme Court of Appeals and the Constitutional Court.

In February, the Constitutional Court refused Telkom's application for leave to appeal against the Supreme Court of Appeal's ruling in Telcordia's favour.

An arbitration process is now in place to decide on the figure that Telkom will be required to pay Telcordia in settlement.

In mitigation

However, the CWU is now asking Telcordia to consider what it believes is the true source of the dispute.

"The court ruling against Telkom, in favour of Telcordia, vindicates our long-held views about the Thintana management style. The Strategic Management Service - resulting from a strategic service agreement between Telkom and Thintana Communications - colonised the thinking and preferred strategic direction of [Telkom] in the then monopolised environment," says Sithebe.

As a result, the union is "kindly requesting" that Telcordia considers various "important facts" in its settlement negotiations.

These include:

1) The [then] role of Thintana Communications in the awarding of tenders and Telkom Business strategy.
2) The [then] role of Strategic Management Service in the violation and the termination of the binding contract.
3) The diplomatic indemnity accorded to the members of the Strategic Management Services - and their lawsuit against Telkom SA.
4) The challenges faced by Telkom SA in a liberalised and competitive environment.
5) The fate of vulnerable workers in a dwindling fixed-line market.

Concludes Sithebe: "Organised labour will support settlement terms that enable Telkom to continue to be an operator in a competitive environment. CWU is willing to meet Telcordia management."

Preparing costs

Telkom's group executive for corporate communication Lulu Letlape says Telcordia's claim against Telkom currently constitutes $130 million (R930 million), plus interest.

However, its annual report for the 2007 financial year shows the company provisioning only $70 million (R497 million) for the claim.

Says Letlape: "If the arbitrator awards an amount of more than $70 million it is expected to have an effect [on Telkom's financial condition and results], but Telkom does not expect the effect to be a materially adverse one."

Telkom expects arbitration to be finalised within its 2008 financial year, which runs to 31 March 2008.