At a time when Telkom has started a scramble to cut costs, the group is still considering paying shareholders dividends, a move unlikely to go down well with employees and other stakeholders.
The Communication Workers Union (CWU) has condemned the fixed-line operator’s plan to shed jobs as part of cutting costs.
“The union condemns and rejects a decision by the company to slash jobs that will affect over 2,000 workers in a few months’ time,” the union said.
Last week, Telkom indicated it could shed 15% of its workforce as it announced it had begun a consultation process with affected employees as part of a wider effort to reduce costs and increase profitability.
The latest staff number is from September 2022, at 11,788 employees.
The group is also looking to firm up its cash position by selling a portion of its device receivables book to financial institutions for R1bn, another piece of its cost-cutting exercise.
While Telkom is clearly focused on cutting costs, it is also looking to reinstate dividends after a three-year suspension in the financial year that starts in April.
In a statement sent to Business Day, Telkom said: “The reinstatement of the dividend policy is under consideration and an update will be provided at the end of the financial year.”
In the present economic environment, where consumers are hard up, this will probably not sit well with those losing their jobs in the name of preserving cash.
The CWU has accused Telkom’s management of using jobs cuts as an easy way to make superficial profits, placing most of the blame on former CEO Sipho Maseko.
“Telkom has been in the jobs reduction project in segments of every two years in this following sequence: 2014, 2016, 2018, 2020 and now 2023 and the rationale behind these jobs bloodbaths is the same with a few senseless additions such as the release of spectrum, load-shedding and the Covid-19 lockdown,” said the union.
“These are just lousy excuses of creating ‘artificial profits’ to the benefit of the executive, board members and shareholders. The fact that during the period of lockdown regulation, telecoms were thriving as most businesses relied on their network (communication) to conduct the day-to-day running of their businesses contradicts Telkom’s rationale to cut jobs.
“Every two years there were retrenchments and in every other two years there were bonuses and dividends paid among the executives and the board members.”
The partially state-owned operator announced a raft of cost-cutting measures as it reported earnings for the third quarter to end-December. The group’s profitability has been hit by rising living costs, which have lowered demand for some products while consumers have had to bear the increased operating costs due to ongoing power cuts in the country.
Telkom’s overall performance continues to be hurt by the group’s migration from legacy and voice revenue businesses, which have been declining in recent years as people favour newer technologies such as fibre.
However, these new technologies come with lower margins for Telkom, resulting in more pressure on earnings.
Group revenue grew 2.3% to R11.031bn for the December quarter, largely driven by growth in active subscribers — mobile and fibre, increased data traffic, and higher handset and equipment sales to retail and enterprise customers.
Group earnings before interest, tax, depreciation and amortisation were down 13.5% to R2.492bn as a result, driven by the drop in legacy revenue, a restructuring of the mobile business to bring in more annuity revenue and higher operating costs due to load-shedding.
Telkom shelled out an additional R150m in the quarter to mitigate the effects of load-shedding.
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