Telkom South Africa Seeks R1.3 Billion Outsourcing Saving
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 26,000 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. 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.