Telkom: annual report

Meeting report

LABOUR AND PUBLIC ENTERPRISES SELECT COMMITTEE
5 November 2002
TELKOM: ANNUAL REPORT

Chairperson: Ms C Nkuna (ANC, Limpopo]

Relevant Documents
Telkom presentation

SUMMARY
The Telkom presentation focussed on a broad range of issues including Financial Highlights, the Telkom Foundation, Legislation and regulations and Performance Review. Committee questions ranged from empowerment to the Telkom's high gearing.

MINUTES
The Telkom delegation delivered their presentation [see document]. Some additional points made were the following:
- Mr M Nzeku in his performance review said the 547 faults per 1000 residential lines include the damage done by the recent floods South Africa experienced. A sizeable proportion of Telkom's infrastructure in those areas was damaged and this added to the failure to meet the standard of 390 faults per 1000 residential telephone lines.

- A comparison survey of three minute local calls prepared by Tariffica, a UK based organization, shows Telkom South Africa compares favorably against operators in other countries with comparable economies.

- Mr K Patel, presenting the financial highlights, said that finance charges decreased as a result of the localization of foreign loans which resulted in paying less interest as well as avoiding the fluctuating foreign exchange rates.

- Ms N Vokwana of the Telkom Foundation (which deals with corporate social investment) said they operate both pro-active and reactively on empowerment projects. They go out into the community and actively look for worthy causes, and re-actively by responding to requests from the community. She emphasised that some of the key criteria when selecting empowerment projects are the sustainability of the investment, the management of the program and who benefits from it. In education Telkom focuses primarily on Mathematics, Science and Technology - all skills that the South African job market currently require.

Discussion
[All the questions were asked first and Telkom responded thereafter]
Ms Themba ANC (Mpumalanga Province) asked what the criteria were for selecting empowerment projects.

Mr M Moosa ANC (Gauteng) asked why Telkom's gearing was so high. A question was also asked about the Telkom IPO [Initial Public Offering].

Mr G Lucas ANC (Northern Cape) said that the public had a very different perception from the very positive one portrayed by Telkom in the presentation. What is being done to provide the community at large with the same positive information that the Committee was now exposed to?

Mr T Setona ANC (Free State) asked about retrenchments. And in this regard was Telkom providing skills or entrepreneurial development training. Also how did unemployment affect the payment of Telkom services made available to people who could barely afford this service.

Response
Mr Victor Moche (Telkom) answered that the Government as key shareholder is selling shares not the company. Telkom believes the listing of the shares could take place any time from now until the 30 March 2003. In Mr V Moche's opinion, the marketing of Telkom shares is not being done as effectively as it could be.

In reply to a query about the question mark behind 2005 date in the presentation, he said that Telkom has been going through phases. The phase since 1996 has been one of a monopoly. The following phase, since 2001 has been one of competition with the introduction of another fixed line operator. He stated that more changes are expected in 2005 and the question mark is a deliberate attempt to provoke the question: what is the desired post-2005 direction for Telkom?

With regard to retrenchments, Telkom has retrenched under 2000 people. That begs the question: how could Telkom go from a head count of 64 000 to 40 000? The answer lies in the fact that Telkom has outsourced and sold of many of its non-core businesses. For example,
Telkom owned 64 restaurants, which were all sold to Fedics. Telkom owned a fleet of 26 000 vehicles and even a furniture store. He noted that non-core businesses were sold along with all the personnel so they were now employed by other entities not Telkom.

Mr Moche said that they often run huge job vacancy lists ranging from 1 800 to 2 000 posts. Pointing out that the shortage is not in the creation of jobs but rather the absence of appropriately skilled people to fill those jobs. Telkom currently has 24 000 people on an ABET course which shows that Telkom is mindful of skills development needs in South Africa.

Mr Patel stated that Telkom welcomes the second operator and the new operator would initially be "piggy backing" on Telkom's infrastructure. This would generate more income for the company. Telkom believes that it would not lose significant residential line customers but expected to lose some its commercial clients. Telkom would be competing with its services not necessarily on prices.

Mr Patel explained that Telkom's high gearing is partly because of the R48 billion of investments Telkom is bound to make under its licensing agreement. In comparison with similar companies, Telkom's gearing is "pretty good ".

Mr M Nzeku said that vandalism is still a key problem with public telephones. Telkom currently prefers dealing with business partners like the container-based public telephone businesses, which can be locked up. This also assists small business development. Not only coin telephones are being vandalised, many "are migrating from coins to cards" to defraud Telkom.

The sustainability of payment is a national problem - many people were not aware that they had to pay and some just did not manage their telephones properly. That is why Telkom is encouraging the prepaid telephone system

Ms N Vokwana said they also go into under-performing schools but admittedly on a much smaller scale. When selecting empowerment projects Telkom usually follows the guidance of the Minister of Education.

Mr Moche said that currently locally based licences are being issued to small businesses to assist in the provision of services in the rural areas. In Groblersdal, residents took geysers out of their RDP houses because they were told that the geysers were responsible for their high electricity bills. They then sold them to a local dealer who in turn sold the barely used geysers in the city. "We must be careful to ensure that the infrastructure and services we provide for people do not become a difficulty for them when the bill comes".

Meeting concluded.