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The Disruption of Telkom's Business

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This is what you can disruption and being out-competed. Formerly the leading South African telecom operator, Telkom is dying. It wants to cut 6,000 workers. Even that would not help it in the age of MTN and other better operators, TC Daily newsletter explains with reference to this piece.

Telkom, a South African telecoms company, is planning to sack 6,000 employees by the end of 2020, says the Federation of Unions of South Africa (FEDUSA). Partly owned by the government, Telkom had originally claimed the retrenchment would affect 3,000 workers and will be done in two phases. However, FEDUSA says the company plans to cut 3,000 jobs as part of phase one alone and another 3,000 cuts sometime during the year. The union is resisting the move.

Previously South Africa’s leading telco, Telkom has lost its place to MTN and Vodacom, a mobile company it sold in 2008 to focus on its fixed lines business. After the Vodacom sell, Telkom has had to build its mobile services from scratch. Although its mobile business is growing, it is expensive. Between April and September 2019, more than half of its capital investments went to mobile. Its net debt stood at $838 million in November 2019.

To improve profitability, Telkom has had to cut jobs. It dropped over 2,000 employees between March 2018 and March 2019. The new round of retrenchments comes as the company’s share price crashed nearly 70% from R99.50 to R30 over the last six months.