Why is the telecoms sector cutting jobs?
MTN, Telkom and Cell C are handing out retrenchment letters. Clyde Mervin, president of the Communication Workers Union is calling for the nationalisation of Telkom, questioning leadership and pointing a finger at employment equity issues. Watch here as Alec Hogg interviews a trade unionist and an analyst to get both sides of the story. – CP
ALEC HOGG: Welcome back to Power Lunch. With MTN, Telkom, and now Cell C handing out retrenchment letters, what's happening in the telecoms sector? Here, to give us some insight is Richard Hurst who's Senior Analyst of Enterprise at OVUM and Clyde Mervin, who's President of the Communication Worker's Union – two sides of the fence. Richard, we're just going to ask you to give us the information today. What is going on?
RICHARD HURST: The key to what is happening here is that these mobile network operators – all of them – are between a rock and a hard place. On the one hand, they have consumers and businesses asking them to deliver more for less. On the other hand, they have regulatory environment, pushing down things such as the mobile termination rate as well as an increased competitive environment, forcing these people to become leaner and meaner in their market and operations. I think that's leading to a number of job cuts. It's never pleasant, but you can see that around the world. We're not immune. The other operators are going through exactly the same pains.
ALEC HOGG: So the consumer wants products cheaper, companies have to become more efficient, and people are retrenched.
RICHARD HURST: Yes. It's natural, but the first thing mobile operators will look at is of course, the expense of staff and I know it's very unpleasant but that's a fact of life.
ALEC HOGG: Clyde, from your perspective, clearly you're coming from the other angle. We can see from your red shirt where you sit. Have you engaged with Cell C, MTN, and Telkom yet?
CLYDE MERVIN: We're currently busy with MTN. Two weeks ago, workers were receiving some letters of termination in terms of the consultation process in Section 189. We're waiting for Cell C to consult us on the process, but at the same time, we've been very busy with Telkom because we've indicated to Telkom that they should look at the proper turnaround strategies. For many years, in Telkom, every time there's a crisis the first thing they do is cut heads. I think that in 1999, Telkom was sitting with 67,000 staff members. Today, as I'm speaking to you, they are sitting with 19,000 staff members. Clearly, workers have become victims in the process.
ALEC HOGG: But isn't there a better way in all of this? Isn't there a way of proving greater productivity and because of that, uplifting the workers so they don't have to be reliant on Telkom and they could find jobs elsewhere?
CLYDE MERVIN: Obviously, we look at the skilling of workers but for us, what becomes important then – and is one fight we are taking further with Telkom – is that Government must now nationalise Telkom. It must go back as a state-owned entity because there are very serious issues and challenges in the telecommunications industry and we believe that Government should play a very important role in those processes.
ALEC HOGG: So you want us to go the same way as Eskom.
CLYDE MERVIN: Yes, that's correct. We want to nationalise it.
ALEC HOGG: Why?
CLYDE MERVIN: We believe that government can play a very vital and important role. For that matter, many people who are currently in un-serviced/poor/rural areas don't have access to telecommunication. They are struggling for access. We believe that if Government were in charge of telecoms, we'd have that access because there'd be various processes…
ALEC HOGG: Isn't there enough cross-subsidy in this country already, rather than subsidising workers in this instance? What about the millions of unemployed?
CLYDE MERVIN: Obviously, our understanding is when Telkom is Government-owned there will be job creation in the process. We believe that. One of key challenges is…and I think earlier on, when we looked at issues… If we really look at the local loop unbundling, if we're not careful it might create more damage to the working class. Hence, we are saying we want intervention from Government.
ALEC HOGG: Why would it cause more damage?
CLYDE MERVIN: What we seen… I think that if you looked at the current networks… What we have picked up in Telkom's turnaround strategy is that they're saying they want to have leaner, meaner staff. In the next three years, they want to look at having 7,000 staff members – across. We are saying it's too much. Enough is enough. We cannot continuously lose jobs. Losing nearly 40,000 jobs in three years, says many things.
ALEC HOGG: What about the international experience? Is it similar to what's happening at Telkom where you have a monopoly (as Telkom was) that now becomes more…?
RICHARD HURST: I was looking at France's telecom – the Orange scenario as well as BT. There, they've shed about 2,000 jobs over the past year – each.
ALEC HOGG: What was it from their peak? This is what Clyde's getting at: from 67,000 all the way down to 19,000.
RICHARD HURST: I think it was reduced by roughly between nine and thirteen percent of their head count.
ALEC HOGG: From their peak?
RICHARD HURST: Yes, from their peak. They've still retained many of their skills but just as Clyde alluded to – and you can see that Telkom have to be leaner and meaner – one of the ways they're looking at that is the number of employees per line. They're looking at shaving that down and becoming more efficient.
ALEC HOGG: How do they currently rate with the 'best practices' worldwide?
RICHARD HURST: Well, I'd say they're probably in comparison to the other network operators out there. It might be unfair to compare them to the likes of BT or France telecom.
ALEC HOGG: Why? Don't we want to be world class?
RICHARD HURST: Of course, but there are other nuances in our market, which make a difference. Perhaps it would be fair to compare us more to an Etisalat in Dubai or something of a similar nature, but I still think that another issue for us is that the cost of communication remains way too high, which has created a barrier to entry for many people, particularly in the rural areas. My sole belief is that the only way we can do this is by creating an open, competitive environment.
ALEC HOGG: Clyde, the thing that always confuses me about trade unions, is this. If I were in your shoes, I would be fighting with the management to educate my members, to send them to university, to give them the ability to give their children a better start in life, and to upskill them. When I challenge Telkom on this, they say 'yes, but we have Telkom university. We're doing a lot in that field'.
CLYDE MERVIN: Obviously, what we have agreed is that Telkom has a skills development plan and that skills development plan deals with your training plans – how you train. We are consistently fighting with Telkom to make sure they upskill our members and educate them because tomorrow, if there are other opportunities workers can have that opportunity. One of the setbacks we have with Telkom, just recently… In Section 189, what becomes very evident when we look at Telkom's demographics is that when Telkom employs executives, one of the problems is they continuously employ executives coming from Vodacom. Now, the history of Telkom's CEO comes from Vodacom. I think you know Sipho Maseko. In addition, we have a problem. With all of his appointments, we have seen that 89 percent of his appointments are white appointments.
In terms of Employment Equity, we have a serious crisis in Telkom. Incidentally, we had a national conference from the 25th to the 29th of September and we have called for Maseko's dismissal for various reasons. In terms of his turnaround strategy plans: from what we can see, he's not in line. In terms of Employment Equity, we're having serious concerns.
ALEC HOGG: What turnaround are you looking for? The stock market is saying – and these are very smart analysts… They're saying this company is being turned around fantastically well. They're prepared to put their money into this company for the first time in years. What turnaround…? What are they doing wrong, in your opinion?
CLYDE MERVIN: We have said two things. We want to be part of the turnaround strategy. A few weeks ago, we went to a meeting with Telkom. We've looked at the options. We are going to respond to Telkom around where we believe there should be more efficiency and effectiveness in terms of its turnaround strategy. We are therefore engaging them on those processes.
ALEC HOGG: But does the market have it wrong, then? Are you saying that all these investors who are putting hard-earned savings of South Africans into Telkom shares, are getting it wrong?
CLYDE MERVIN: We are not saying the market is wrong. What we are saying is in some instances… Earlier on, I said to my colleague over here that one of the challenges is that Telkom is now getting many acquisitions. Some of those acquisitions is a business connection to look at better broadband. The question is, when you are doing all those acquisitions, you are still laying off staff and at the same time, when you do those acquisitions, you are retaining some of the staff where you are doing those acquisitions.
ALEC HOGG: But business is dynamic. You understand that, Clyde. Why not ask them to be open with you. Why not ask them 'let's sit around a table. Let's understand what this strategy is' rather than always being confrontational. We need to build this country. I'm sure you agree.
CLYDE MERVIN: We need to deal with this strategy and I'm saying to you about a month ago, we had a strategy session with Telkom where we looked at the strategy and we're going to respond to that strategy. You can't respond in a week's time. There are various challenges you need to respond to because one of the big issues is – and you'll understand where we're coming from as a trade union movement – we must protect and defend decent jobs. Outside, in this country today, the unemployment rate is very high. I think all of us understand that. The unemployment rate is very high.
ALEC HOGG: We know what's happening in the world, but the best way to prepare yourself and your members is by education. We know that. Is Telkom doing enough in that field? Is Telkom doing enough to upgrade its workers?
CLYDE MERVIN: No.
RICHARD HURST: I wouldn't be able to answer any of that.
ALEC HOGG: Compare it with what people in other countries are doing or companies like it, in other countries.
CLYDE MERVIN: Perhaps they could be doing a little bit more and that is just a gut reaction to what I've seen – the likes of BT and France Telecom etcetera doing with their staff. Just mentioning the CEO: a real challenge for us at Telkom is that we've constantly had this revolving door of executives in and out, so I think some stability needs to be created around this current management team that we nicknamed 'the dream team'. Let's give them the shot. Let's allow them to get their strategy in place and make it work, together with Government.
ALEC HOGG: And open the door, and talk to the people who make things happen – those on the ground, people like Clyde Mervin who's the President of the CWU and as you heard, Richard Hurst is the Senior Analyst of Enterprise at OVUM. Clyde Mervin is the President of the Communication Workers Union – them, who brought you the Post Office strike (he told us) but we don't have time to unpack that one just yet. I'm sure we will at some time in the future.