Telkom to Cut Staff by About Half to Lower Costs, Union Says

Telkom SA SOC Ltd. will cut about half of its workforce as Africa’s largest fixed-line phone operator seeks to reduce spending and help stabilize the business, according to a labor union.

Telkom will start the process of firing more than 9,500 of its 19,000 employees within the next six months and will focus on the field-services division, South African Communications Union General Secretary Karriem Abrahams said by phone yesterday. The Pretoria-based company isn’t planning to remove this number and hasn’t specified a figure for reduction, spokesman Pynee Chetty said in an e-mailed response to questions.

“We are going to court,” Abrahams said. “Last year Telkom made an 11 billion-rand ($1 billion) loss. This year there’s a 3.9 billion profit. Last year there wasn’t a need to retrench.”

The company plans to reduce costs by 5 billion rand through eliminating jobs after it halted years of sliding sales partly caused by falling fixed-line usage. It had planned to cut a third of its employees, Chief Executive Officer Sipho Maseko said late last year. Telkom is meeting unions on July 10 and 11, the union said in an e-mailed statement.

Management Layers

The Solidarity union doesn’t know the specific number of positions to be cut, Dirk Groenewald, head of the labor group’s center for fair labor practice, told reporters in Pretoria today. Solidarity, which has close ties with the predominantly white Afrikaans community, is filing documents to a labor court in Johannesburg to prevent Telkom from making race a criteria when cutting jobs, he said.

“Telkom dismisses the speculation that it intends to retrench 9,500 employees,” Chetty said. “The company is not targeting specific numbers of individuals. The aim is to reduce the number of management layers and achieve an employee cost-revenue ratio of 25 percent over the next five years.”

Telkom shares gained 1.8 percent to 49.49 rand at the close in Johannesburg, the highest price since May 2009. The stock has increased 77 percent this year, the best performer on the FTSE/JSE Africa All-Share Index after Sibanye Gold Ltd.

Race Criteria

Solidarity will argue in court that Telkom’s job cut process should be halted while an agreement on the criteria used can be reached, Groenewald said. Telkom plans to follow government employment policy to target white, male employees when cutting management jobs, according to a document SACU and Solidarity said they received from the company in May.

“The company rejects allegations that race is being considered as the only criteria for the placement of employees in Telkom’s new structure,” Telkom said in a separate e-mailed statement. “The focus is on retaining the right skills for its turnaround strategy and will consider several criteria throughout its restructuring process.”

Employment equity, a South African policy to boost black participation in the workforce, is one of the criteria, Telkom said.

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