Telkom retrenchments to impact 15% of staff
Telecoms group Telkom says it has entered a formal retrenchment process in terms of section 189 of the Labour Relations Act.
Characterised by the group as a “restructuring”, it said that 15% of its workforce will be affected. At half year 2023, the group had 11,788 employees, putting an estimated 1,770 jobs at risk.
The process will impact all business units and subsidiaries and is intended to ensure the sustainability of the group, it said.
In a trading update for the third quarter ending 31 December 2022 published earlier on Tuesday (14 February), the group indicated that it would initiate cost-cutting measures across the group as a result of the difficult trading environment in South Africa.
“The impact of ongoing load shedding for the quarter and the increased mobile network footprint resulted in a higher cost base for the Group. This, coupled with the required investment in working capital to optimise the Mobile subscriber base mix, negatively impacted Telkom’s profitability for the current financial year to date,” it said.
“The working capital investment in Mobile handsets and post-paid cost of sales are immediate costs, with corresponding revenues recognised over 24 to 36 months, and thereby do not immediately offset the upfront costs associated with growing our post-paid subscriber base. This, in turn, has also put pressure on margins and cash generation in the short term.”
In response to this, Telkom said it has embarked on cost-saving initiatives targeting a reduction of costs over the next 6-18 months to reduce and optimise the group cost structure and return to a blended Group EBITDA margin of more than 25%.
“A number of initiatives are already in progress to address the group cost base. These are aimed at rebasing our cost structures. The benefits of these initiatives are expected to be visible in the medium term from FY2024 onwards.”
The section 189 notice is also part of these cost-cutting measures.
“As the group manages the delicate migration of revenue between old to new technologies, it is challenged with managing the costs associated with the different technologies, the competitiveness and sustainability of the group.
“Management has therefore embarked on a restructuring programme, which includes the S189A process, to optimise group costs in line with evolving technology capabilities and demands.”
Telkom said it will try to minimise the impact of the restructuring and will engage with all relevant stakeholders and employees across the group.
Quarterly update salient features
- Group revenue up 2.3% to R11 031 million
- Group EBITDA down 13.5% to R2 492 million
- Telkom Mobile revenue up 7.0% to R5 685 million
- Mobile service revenue up 4.5%
- Handset and equipment revenue up 17.0%
- Mobile data traffic and subscribers up 25.6% and 12.9% year-on-year (‘y-o-y’) to 309 petabytes and 18.6 million subscribers, respectively
- Mobile broadband customers up 9.9% to 11.5 million, comprising almost 62% of active mobile customers
- Openserve Fixed data traffic up 15.0% to 492 petabytes
- Leading FTTH connectivity rate of 45.9%, with number of homes passed up 27.6% and homes connected up 31.0%
- IT business revenue up 8.8% to R1 587 million
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