Unions claim deal breaker

By Damaria Senne for Telkom
Johannesburg, 30 Nov 2007

The proposed Telkom-MTN deal failed because the Telkom board felt the strategic desirability of the two entities was not compatible, and the cost of the transaction on equity structure, market structure and operational structure was too high.

This is according to sources close to the negotiations, and emerged amid allegations of government and ANC involvement in the deal. ITWeb can exclusively reveal that labour`s refusal to support the deal partly led to its demise.

Yesterday, ITWeb broke the story that the government and the ANC were secretly behind the proposed merger, and an ANC official confirmed that the breakdown had taken some of the members of the party by surprise.

Legal expert Mike Silber says the deal had significant implications for labour as the law [the Labour Relations Act and Companies Act] would not allow the two companies to unilaterally alter the conditions of employment of employees. The unions thus were in a position to halt the deal, as they demanded that employees were to maintain the conditions of employment that they had pre-merger, and that would have been very onerous for the two telecoms companies.

The South African Communications Union (SACU) and Solidarity confirm that then Telkom acting CEO Reuben September and MTN Group CEO Phuthuma Nhleko met representatives from SACU, Solidarity and the Communications Workers Union (CWU) last week Thursday to solicit labour`s support for MTN`s purchase of Telkom`s fixed-line business.

The telco chiefs also asked the unions to sign a memorandum of understanding (MOU) in support of the merger. While MTN is not unionised, all three unions are represented at Telkom.

SACU general-secretary Sulaiman Waggie says his union refused to sign the MOU, as the transaction would have led to job losses. He adds that the telecoms companies did not present details about how the deal would impact on labour and how many jobs would have been lost.

Victory for labour

Waggie also says the SACU`s concern was that, following the merger, MTN would have had double the human resource capacity it needs in certain areas, and those workers would have had to be retrenched.

"Our view is, and has always been, that we will support an initiative that will create jobs and support skills transfer. We do not support any initiative that would lead to job losses. What we did support is that they could talk to each other," he says. "The talks are now officially off and we see that as a victory [for labour]."

Solidarity deputy general-secretary Dirk Hermann says the trade union signed the MOU, on the understanding that there would be no job losses.

CWU spokesman Mfanafuthi Sithebe refused to comment on the meeting with the telco chiefs. However, a number of sources confirm that CWU was represented at this meeting and also refused to sign the MOU.

Sithebe also expressed satisfaction that the Telkom/MTN talks were called off. "To be brutally frank, we are happy that these negotiations failed."

"We were concerned that labour was not involved in the talks and if the transaction led to job losses, we would have failed to protect the interests of our members."

The CWU previously asked government to ensure union representation in the sub-committee. This committee was formed to safeguard worker interests when Telkom and MTN were still engaged in talks. However, government failed to keep its promise and a meeting of that committee was never called, Sithebe says.

Telkom refused to comment on the reasons for the cancelled talks with MTN, referring ITWeb to the cautionary that was published on Wednesday. MTN was unable to respond to media enquiries at the time of going to publication.