Telkom intends slashing its costs by R1bn/year for the next five years in an effort to unlock shareholder value and turn around its financial performance, its CEO, Sipho Maseko, was quoted in a newspaper report on Wednesday as saying.
This would include job cuts, Maseko was quoted by Business Day as saying.
He added that he would begin talks with organised labour next week on possible retrenchments. The cost-cutting would involve all areas of Telkom’s business.
The newspaper said that Telkom had given earlier guidance that it would reduce headcount by a third over five years, involving in the region of 7 000 jobs.
But the move is likely to face opposition from labour unions as well as government, which directly holds two-fifths of Telkom’s equity, making it by far the largest single shareholder.
Telkom’s share price has rallied strongly in the past year on the hopes that Maseko will lead a turnaround in the troubled operator’s fortunes.
In June last year, just two months into his tenure, Maseko announced that Telkom would impair the carrying value of its fixed-line network by R12bn, reducing its net asset value from about R57/share to R34/share. Since, then, the share price has rallied significantly.
In the past 12 months, the share has skyrocketed by more than 150%. Since its 12-month low point of R11,93, on 11 May 2013, the counter has added 208%. Its market capitalisation is now just shy of the R20bn mark.
In March, Telkom announced it had signed a heads of agreement with rival MTN in a move designed to de-risk the loss-making Telkom Mobile business, which was launched belatedly as South Africa’s fourth mobile network operator.
In in terms of the agreement, MTN will take over the financial and operational responsibility for the roll-out and operations of Telkom’s radio access network. In addition, the two firms’ customers will be able to roam on their respective networks. Further details of the agreement are expected soon. — (c) 2014 NewsCentral Media