Telkom has five years to connect four million lines. Can it meet the challenge of universal service without a substantial restructuring? Aspasia Karras reports
Telkom is probably the most vilified of South Africa’s parastatals. Seen as inefficient and bureaucratic, consumers’ greatest frustration is the lack of an alternative.
While cellular technology promised to provide an in-road into the telecommunications monopoly, it has failed substantially to address the issue of universal accessibility.
The Posts, Telecommunications and Broadcasting White Paper, published in March, clearly calls for the broad-scale restructuring of the telecommunications behemoth by establishing a universal service and gradually liberalising the market structure.
Robin Brawn of the National Telecommunications Policy Project (NTPP) describes the process as essentially “a fully inclusive and consultative battle between Telkom wanting to retain its monopoly as far as it can, while the alternative voices have been pushing in the opposite direction”.
“The most crucial part of any restructuring exercise is to build and sustain consensus,” says Minister of Posts, Telecommunications and Broadcasting Jay Naidoo. “Not much attention has been paid to this issue in the past. Many of the vested interests in the restructuring process see trade unions as a hindrance, but I see them as an essential part of this solution.”
The compromise position adopted in the paper has established a five-year period of exclusivity, in return for which Telkom has promised to roll-out services to the underserviced community, and effectively double the four million lines it has currently connected.
At present, Telkom connects
190 000 lines a year on average; its roll-out goal has never been accomplished elsewhere in the world. The question then is: how can this inflated and slow bureaucracy get it right?
Says Naidoo: “We remain united and committed to roll-out infrastructure for the four million lines and in that regard we need an injection of capital, new technology and expertise to realise the objectives.”
Telkom wants a foreign strategic equity partner, both because it can then gain a foothold in the international playing field by associating itself with one of the leading global giants, and so that it can benefit from the sorely needed project management expertise of the potential investor.
The debate and sensitivities around the issues are heating up, as the legislation is due for cabinet consideration this month and will be tabled in Parliament in June. The cabinet reshuffle has not helped as Naidoo inherits the portfolio at a critical time, particularly in light of strong union opposition to any talk of transformation along these lines.
Advocate Dikgang Moseneke, however, suavely comments on his position as Telkom chairman: “I have been here for a year-and-a-half, the challenges are obviously daunting, but it’s very comfortable.”
A high-level meeting was held between Naidoo and Moseneke last week, with the aim of discussing a way forward on the transformation of the parastatal and related issues.
Moseneke is, however, vague when it comes to programmes: “While we fully agree with the White Paper, the devil is in the details.” He points out that Telkom has already laid the plans for restructuring along its core business lines, and plans an extensive human resource evaluation and development drive, examining skills and qualities of employees along the new strategic objectives.
His problem is clear: “We have inherited over 16 000 workers; rationalisation is not just about numbers, but rather about creating high levels of efficiency through appropriate skills. It’s about adding value, but we have no immediate plans to do anything dramatic. It is a process that must be negotiated through the unions.”
Commentators in the field argue that in telecoms staff are measured according to lines. Thus, at current output levels there is an obvious need to rationalise staff, but if Telkom is to deliver five times its present capacity, then the staff numbers will be appropriate. But can Telkom actually deliver, especially under the proposed time constraints?
The proposed Bill attempts to structure inter- related measures that will act as checks and balances in the transformation process. But the Bill only looks at the phased liberalisation of the market, and the social and developmental objectives of extending the telecoms service.
The question of monopolies will be addressed in legislation only after the National Framework Agreement is resolved. The intention of the legislation is to set up an independent regulator, which will monitor progress and work with a universal service agency and related fund.
The success or failure of the telecommunications transformation exercise will depend on the strength or weakness of the regulator, and the capacity of labour, management and government to rise to the challenge of universal service.
For Moseneke, the way out is clear. “Eskom has been successful at making cheaper connections on such a large scale, because it built up excess capacity over the last 15 years – and built it on public funds. Telkom has not been able to do that; our relationship is traditionally skewed. Of 40-million South Africans only 10% are connected. We need to build a major trunk network, which Eskom already has.”
Moseneke points out that costing (an average R800 against Eskom’s R35 per connection) of the service is partly a function of history, and partly a result of Telkom’s relationship with suppliers.
“If the rand continues to drop it certainly does not do us any favours.”
He elaborates: “At the moment, 80% of our revenue comes from 20% of our clients, doing local and international business. Only with a major network roll-out can we balance the tariffs, which are higher than they should be. The key to an affordable and reliable service is more consumers, and in order to have a major network build-up, we cannot do it out of our own funds. We have a large number of interested partners.”
At the moment, Telkom has serviced R2-billion of its R11-billion debt, but while functioning at a profit, cannot raise the capital needed for the roll-out. “Without the investment, Telkom is a dead duck,” argues Brawn.
But Moseneke sees the future of telecommunications as ripe for investment. “We are only scratching the surface. Telkom is an appropriate platform into the region.”
Brawn agrees: “The ramifications to the economy of a roll-out are huge. It implies an immediate 2% bump-up of the gross domestic product.”
Naidoo has to make some crucial decisions within the next few weeks. The hard ball is in the government’s court, concludes Moseneke. “It is up to our shareholders to make all the hard decisions.”
Adds Naidoo: “We are confident that we are making sufficient progress and will shortly be in a position to make a public announcement that will bury speculation around this issue.”