Telkom works around unions to cut labour costs

Fixed-line operator Telkom is looking for alternative ways to reduce labour costs after a court decision last week forced it to put on hold plans to axe 4,400 jobs.

The telecoms company on Monday offered all non-union workers voluntary severance packages or early retirement and is considering implementing a wage freeze, a shorter working week and outsourcing more functions as Chief Executive Sipho Maseko tries to contain costs.

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"These measures are necessary as our business is simply not sustainable in its current form," Maseko said.

Telkom's share price, which has climbed by 300 percent since Maseko took the reins two years ago, was down more than 6 percent at R56.97 by the afternoon (15:17).

The company, in which the government owns a stake of about 40 percent, has squeezed its suppliers by renegotiating contracts worth R10 billion and has sold properties worth more than 750 million rand in a portfolio Maseko has described as the size of Luxemburg.

Telkom's workforce is about 30 percent bigger than those of its peers, making it difficult to compete. Its staff expenditure to revenue ratio is 29 percent, compared with 7 percent for Vodacom and 8 percent for MTN, Maseko said in a presentation last month.

However, it's proposed 4,000-plus job cuts have encountered strong union opposition. Three unions challenged the plan in South Africa's labour court, saying the company did not consult them adequately. Telkom denied the accusation and the court last week referred the dispute to South Africa's Commission for Concilliation, Mediation and Arbitration.

The restructuring plans announced on Monday would not all need to involve trade unions and Telkom said that it is offering non-union employees more generous severance packages than required by law.

The company said it will seek the consent of the unions to extend the offer to union members.