Lesley Stones
10 September 2008
Johannesburg — TELKOM may be able to trim R1,3bn a year off its running costs with a deal to outsource the care and maintenance of its core network.
The operator is assessing proposals by international equipment suppliers and technology integration providers, and will enter detailed talks with prospective partners soon.
Chief operating officer Motlatsi Nzeku said this week that expressions of interest had been received from many groups, including Ericsson, Nokia-Siemens and Cisco, as well as systems integration specialists.
The next step was to firm up requirements for service levels and cost structures. It would then negotiate with bidders and evaluate their technical skills and ability to meet expectations.
The effect on its 26000 staff will be high. Union Solidarity expects up to 19 000 jobs to be affected if networking facilities, Telkom Direct shops and logistics processes are outsourced.
Solidarity spokesman Jaco Kleynhans said it did not oppose the plan, as SA needed a better infrastructure, which a more technically accomplished player could provide. But job protection conditions would have to be met before the union would give its full support, he said.
Nzeku said the contract was probably too large for a single winner. He expected a decision in the first quarter of next year.
Telkom needs to cut running costs with demand dwindling. New customers signing up for its services are down 30% a year, and 28% of consumers and small businesses default on their bills.
"You have to balance the capacity on the inside to match the demand," Nzeku said. Having employees work exclusively for Telkom while several other companies did the same was inefficient. It led to a "wage auction" as skilled technicians hopped from job to job.
The answer was for one world-class operator, equipment supplier or integration company to provide network-management services to several operators simultaneously.
"That's a lot more efficient in the use of skills, equipment and systems," Nzeku said.
Exact terms are not yet defined, but the tender will be to manage and when necessary upgrade all Telkom public networks. It will not outsource networks it provides exclusively for big customers such as Absa.
Case studies showed operators could typically cut running costs by 28%, and boost service quality by 10%-15%.
That would save about R1,3bn of the annual R4,8bn Telkom's networks cost to run.
Nzeku said union representatives had been taken to several countries including New Zealand, Brazil and Germany to study operators that had outsourced some activities. Job losses posed a major challenge, so the unions "will not be enthusiastic about this", he said.
However, Kleynhans said: "We are not that negative about it. We are going to work with Telkom to make it successful because it's in the interests of the industry that changes happen.
"The economy needs a good infrastructure, and part of that is a good telecoms infrastructure.
"We really need a world-class industry, and outsourcing will have a positive effect because Telkom is far behind some other companies in the way it operates."
One hitch could be Solidarity's insistence that no jobs are lost, as bidders may be reluctant to absorb vast numbers of extra staff.
Read comments. Write your own.
Copyright © 2008 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
Does this not tell you something? It is plain,Telkom cannot do the work they should be doing,without an extra R1,3 BILLION.Now we can wait until we hear of the cost overuns and how it is actually going to cost us more.