February 16, 2015 / 11:06 AM / 5 years ago

UPDATE 3-S.Africa's Telkom to cut jobs, close some shops

* Telkom shuts retail stores, begins lay-offs

* Disputes union claim that 10,000 jobs to go (Recasts with Telkom laying off people)

By Tiisetso Motsoeneng

JOHANNESBURG, Feb 16 (Reuters) - South Africa’s biggest landline provider Telkom SA said on Monday it was laying off an unspecified number of staff, denying union claims that it may slash as many as 55 percent of its 18,000-strong workforce in a major restructuring.

Telkom, in which the government owns a stake of about 40 percent, is in the middle of a turnaround plan that aims to bring down costs and better compete with wireless operators MTN Group and Vodacom.

Telkom planned to close some of the company’s 95 stores that were no longer viable, it said in a statement.

“Telkom’s restructuring process is an imperative for the survival of the business and to secure the long term and sustainable growth of the company,” the company said.

The Solidarity Union said 20 stores would be shut.

The union had said earlier it expected to receive a formal notice of the job cuts from Telkom on Monday in an exercise that could affect 10,000 people.

“The company’s management informed the trade union that it is planning on restructuring its field force division,” union spokesman Marius Croucamp said in a statement. “As many as 10,000 employees could possibly be affected by the process.”

Telkom disputed that statement saying its field force — made up of staff working outside of offices, such as technicians — was not under discussion in talks with unions on Monday.

Any job cuts would be in the call centre, IT legacy systems, supply chain warehousing and Telkom stores, Telkom said.

The company, which also has its own smaller wireless business, has the slenderest operating margin in the industry, an indicator of a company’s ability to control its costs.

As at the end of the 2014 fiscal year, its margin came in at around 14 percent — nearly half the margin of closest rivals MTN and Vodacom, according to Thomson Reuters data.

Telkom has been trying to make money out of a mobile unit launched four years ago to offset sliding profits from its traditional fixed-line business. But analysts had warned that move was ill-timed because the market was already dominated by MTN and Vodacom

Last year, Telkom laid off nearly 380 managers as part of its drive to bring down costs by 1 billion rand ($86 million) annually over five years.

Shares in the company were up 0.1 percent at 77.00 rand at 1535 GMT, while the JSE All-share index was flat. ($1 = 11.6300 rand) (Additional reporting by Peroshni Govender; Editing by James Macharia and Keith Weir)

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