Layoffs Rock Telkom SA As The Operator Fiddles With Profitability

By  |  February 15, 2023

Telkom, one of the leading mobile network operators in South Africa’s seemingly outsized telecoms sector, is struggling to make profits. As such, the company has resorted to layoffs, retrenching a reported 15 percent of its workforce. 

In a statement to the trading market yesterday, the telco revealed it is in the process of activating a formal Section 189 consultation process, one which would see the business restructure some of its operations. 

Section 189 (S189) governs how South African companies should go about letting go of workers. According to Telkom, the downsizing effort will affect all of its units and subsidiaries. 

The telco’s results for Q3 2022, which ended in December, showed revenue growth of 2.3 percent to USD 61 M (ZAR 11 B). But, its EBITDA reduced by 13.5 percent, which reflects that the operator is still bending over backward with achieving profitability and bottom-line growth.

This was revealed in a statement to shareholders released on Tuesday as the company released results for Q3 2022, which ended in December.

“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,” Telkom said.

The telco has started executing some cost-saving initiatives to address its expenditure base; the benefits of this exercise, according to the firm, will positively reflect on its 2024 financial year. More so, it plans to raise over USD 55 M (ZAR 1 B) before the end of the 2023 financial year by selling qualifying devices to financial institutions. 

“We are mindful of these impacts on the future of our businesses and we have thus embarked on cost-saving programs to be implemented with sustainable benefits materializing over the next 6 – 18 months to mitigate cost pressures and improve the Group’s medium-term profitability,” said Telkom chief executive, Serame Taukobong. 

From the looks of it, Telkom South Africa is in a bit of a fix. Little wonder as regards its efforts to land an acquisition from one of its rivals in the market. Last year, MTN, the second-largest telco on the turf, said it would buy up the company but pulled out of talks after discovering a case of no exclusivity. 

Data-only provider Rain attempted to tie up with Telkom in an indirect bid to thwart MTN’s grandiose acquisition-centric plan to overtake Vodacom as South Africa’s biggest mobile operator. However, these plans similarly fell through due to seemingly avoidable delays. 

Meanwhile, this is not the first time Telkom is cutting jobs. It reduced its permanent staff by 12.5 percent in 2018, shed 2,000 jobs in 2019, and retrenched some 3,000 employees in 202 citing consistent declines in its fixed voice and fixed data offerings. 

Other South African companies have also reduced their workforces; Luno, Naspers-owned platforms Prosus and OLX, and even British American Tobacco (BAT) have also downsized in the market. 

Image Courtesy: Media NPR

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