Telkom Seeks to slash workforce by two-fifths to cut costs

Telkom SA SOC Ltd. is seeking to cut its workforce to about 8,000 by July, an about 40 percent reduction, in an effort to trim costs at Africa’s biggest fixed-line phone company, an internal document shows.

The company, about 39 percent owned by South Africa’s government, has identified 6,250 positions that it wants to eliminate from a total workforce of 13,895 as of Jan. 29, according to a plan known as Project High Ground outlined in the document, which was obtained by Bloomberg and verified by Pretoria-based Telkom. The reductions will come from outsourcing 3,750 positions to other companies and moving a further 2,000 to a company it bought, Business Connexion Group Ltd. In addition 500 jobs may be cut.

“To secure the future sustainability of Telkom, we have to take serious actions to manage the very difficult environment within which we operate,” spokeswoman Jacqui O’Sullivan said by e-mail on Monday. “Data prices continue to drop while demand grows and we face all of this with a cost base that is not aligned to local competitors and global trends.”

Under Chief Executive Officer Sipho Maseko, who took the helm almost three years ago, Telkom has been cutting jobs and reducing operational costs to revive revenue hit by the decline in landline use. The company has been investing in its mobile-phone service. Data-revenue from the unit increased 56 percent in the quarter ended Dec. 31 from the year before, compared with a 5 percent decline in the larger fixed-voice business.

Industry Average

Currently Telkom’s employee cost-to-income ratio is about 24 percent and the company wants to reduce that to 16 percent., the industry average, it said in the document. O’Sullivan said some changes have been made to the plans since the document was written without giving further details.

The company plans to start wage negotiations with remaining employees and labor groups only after the job cuts and outsourcing initiatives are completed, the document shows. The operator has cut more than 4,200 jobs in the fiscal year that will end March 31 through voluntary severance packages and outsourcing, reducing the workforce from 18,333 employees at the end of the previous fiscal year.

Telkom revenue fell 2.5 percent to 31.7 billion rand ($2 billion) in the year through March, the fifth consecutive year of declines. The company told employees on Feb. 25 it plans to cut 300 head-office jobs and outsource a further 254 to a separate company as one step of the initiative.