Telco sector should be under state control: CWU

The Communications Workers Union (CWU) has defended Cabinet’s decision to block a deal between telecommunications group, Telkom, and Korea-based KT Corp, stating that the telecommunications sector should be under state ownership.

“The Communications Workers Union (CWU) would like to congratulate Cabinet for its decision not to mortgage Telkom further to the Koreans.  Telecommunications is a strategic sector that should be firmly under state ownership and control, and the country still lags far behind in terms of telecommunications development indicators,” the union said in a statement on Monday (18 June).

“We would also like to congratulate Minister Dina Pule for her firm, progressive stance, which is in-line with building the capacity of the democratic developmental state in the ICT sector.  We are concerned that there are some neo-liberal individual Ministers who fancy themselves above the Cabinet collective, and openly oppose the decision of Cabinet.  We condemn this un-comradely behaviour in the strongest possible terms, the CWU said.

On 8 May 2012, Telkom announced that it had reached an in-principle agreement with KT regarding the terms of a venture that would see KT acquiring a strategic equity shareholding of 20% in Telkom by way of a specific issue of shares for cash at a cut price of R25.60 per new Telkom ordinary share.

However, the group was informed at the start of June by Minister Pule, that the proposed transaction had been presented to the cabinet of the South African Government and that cabinet had taken the decision not to support the transaction as proposed.

The union says that “Telkom management agitated” for the Koreans to buy a stake in the group because they were of the view that the Koreans would turn Telkom around by coming in with management expertise, and money to facilitate its investment programmes and facilitate the transfer of technology to modernise Telkom.  “Telkom management has come out openly to challenge Cabinet’s correct decision on refusing to sell a stake of Telkom to Koreans,” it said.

The union argues that current management is dismally failing to turn around Telkom and instead focuses on retrenching workers to create artificial profitability.  This strategy, according to the CWU, “has gutted Telkom to the bone.  It has failed and has left Telkom even weaker than it has ever been”.

A call for new management

The CWU calls for the Minister and Cabinet to review Telkom’s management with a view to get a new, ‘competent management’ that puts the perspective of building a democratic, anti-imperialist, developmental state at the front. “South Africans have more than enough talent to manage their assets. In addition we do not have to mortgage our country in return for management expertise,” the union said.

It added that the scale of the financial mess that management has plunged Telkom in will not be resolved by getting money injected by Koreans.  The union highlighted the failed deal in Nigeria and a potential fine for anti-competitive conduct.

“Together these deals are worth more than the proposed amount of money that the Koreans were promising to put in.  In any event, we do not think the Koreans would agree to face litigation for matters in which they were not part.  Once again, the fundamental problem in Telkom is management, which we urge the Minister to move with speed to tackle,” CWU said.

A call for national ownership

CWU said it is of the view that, since Telkom is a national asset, ahead of which there are major developmental priorities that it must fulfill, government must come with innovative ways to increase national ownership of this asset.

“Specifically, government must consider engaging the PIC, and it must consider digging into its coffers to acquire a greater stake in Telkom, so that Telkom is once again state-controlled to fulfill developmental priorities,” CWU said.

“The crisis in Telkom is a perfect opportunity for government to take this asset back, and use it to drive a developmental agenda such as rolling out broadband to schools, households, and government facilities, skills development and training, ICT research and development to boost innovation, locally procure inputs and thus support local ICT manufacturing sector.  Selling a stake to the private sector, foreign or local, will not assist in building state capacity for development,” the union said.

Hello Vodafone

The CWU also called for Cabinet to consider the option of re-acquiring a stake in Vodafone.  “We are firm that without a strong presence in the ICT sector, both mobile and landline, this country will suffer the twin crises of massive exploitation through tariff manipulation and the drain of resources when foreign owners take their profits out.  Government must acquire a stake in Vodafone (sic) and use the boom in the mobile market to boost the expansion of broad-band access by Telkom.”

It also calls for an urgent review of the Telecommunications regulatory regime, stressing that the current situation of full-blown liberalisation entrenches profiteering over development.

“Government must set appropriate economic conditions to ensure that Telkom is able to fulfil its developmental priorities, especially because the vast majority of our people do not have high incomes and a significant number of them are unemployed and depend on social grants.  This vast majority have a right to access to ICT services as well,” the union said.

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Telco sector should be under state control: CWU