Telkom to spend R1.5 billion on voluntary retrenchments

Telkom has advised its shareholders that it has commenced phase one of a two phase restructuring process, which will see workers offered voluntary severance and early retirement packages – at a cost of R1.5 billion.

The telco group announced earlier this year that it would look at reducing its overall headcount using this route, following the technological shift to fibre, LTE/LTE-A as new sources of revenue, notwithstanding lower margins.

“This has been compounded by a rapid decline in our traditional high margin fixed voice business, in line with global trends,” it said.

“Although the multi-year transformation programme has reduced legacy fixed voice revenue contribution to Group revenue from 56% in FY2013 to 22% in FY2019, we have since seen an accelerated decline in fixed voice revenue in the second half of the financial year relative to the first half.”

The group’s mobile business sustained its growth trajectory into the second half of the year from a higher base and continued to drive the overall group revenue growth – thus offsetting the negative impact of the fixed voice revenue, it said.

“However, the growth in the new revenue streams has not been sufficient to offset the negative impact on Group EBITDA, therefore Group EBITDA continues to be under pressure.”

Telkom issued Section 189 Notices in terms of the Labour Relations Act to employees, and started the process of consultation to restructure the business “for future competitiveness”.

It has also offered voluntary severance (VSP) and voluntary early retirement packages (VERP) as an alternative to retrenchments.

Telkom said it has initiated the first phase of the process of the VSP, VERP and Section 189 Notices at a total cost of approximately R1.5 billion which it warned will have a negative impact on the FY2020 earnings.

“The cash outflow related to the restructuring process is expected in the first half of the new financial year. Available cash resources will be used to fund the Restructuring Process. This allows Telkom to remain within the current debt levels,” it said.

According to an internal document seen by MyBroadband, 1,677 Telkom Group employees have requested voluntary severance and voluntary early retirement packages.

The two phase restructuring process is as follows:

  • Phase 1: Openserve, Group IT, and Consumer will be affected between January to April 2020.
  • Phase 2: Corporate Centre and Telkom SOC Support (HR, finance, procurement) will be affected between May to August 2020.

Read: Union heads to court to stop Telkom job cuts

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Telkom to spend R1.5 billion on voluntary retrenchments