Here’s why Telecel employees should fight for share ownership, not salaries

Wage disputes almost always leave a nasty taste in people’s mouths.  Employees always expect more than what the employers want to give and there’s a back and forth that is frustrating. It doesn’t get any better when the negotiations become a media spectacle.

With the way things are getting tougher in the local telecoms industry, issues to do with salaries, the sort that Econet had to deal with recently, will clearly affect every operator. Rumors have already been circulating that Telecel is set to reduce salaries by 20%. (When we spoke to Telecel they denied this and chalked it up to negotiations that are under way)

Reports indicate that several options were presented to Telecel employees for the liquidation of the 20% including receiving it as airtime. The airtime option, while it may serve some, may not be the best solution as it forces the holders to cede up to 10% of the value to sale at wholesale price and to compete against the employer; Telecel itself.

 

Now that Telecel is indeed showing signs of strain from the recent Licence instalment of $5 million, employees are presented with greater bargaining power where they can lobby for equity transfer under a negotiated cliff or gradual vesting plan depending on how much they would want to cede. While Telecel may be proposing just 20%, it is possible that employees are willing to contribute as far as 50% to secure a future post-Telecel.

Simply put, Telecel employees should be clamouring loudly for the Employee Share Ownership Trust (ESOT) right now while Telecel figures out issues around who owns what and tries to fall into the right path regarding indigenous regulations.

How does the ESOT work?

By subscription (deduction or contribution from salary) gradually or outright, employees get to buy a certain percentage of the company’s shares from the current shareholders.

Besides compliance with the Indigenisation requirements where Telecel international and Empowerment Cooperation can “donate” 5.5% each towards the trust, the ESOT creates for Telecel, employee commitment and motivation especially in the likelihood of worsening economics and company performance.

It also allows the company to enjoy reasonably lower tax rates than through ordinary remuneration as employee share purchases are usually not taxed at all until an employee sells upon leaving the company.

For Telecel employees, the ESOT arrangement will assure them of a second pension that is immediately available upon leaving the company. It gives them direct benefits in any deals that affect the shareholders and the room for dividends with the success of the company. It also gives them a voice and representation up to board level as co-owners of the company privy to the affairs of Telecel.

It may not be an easy task to convince the shareholders Telecel International and Empowerment Cooperation to cede their shares, but it clearly takes them one step further in satisfying government requirements. This is a hurdle they will need to overcome before successfully courting investors.

Whether true or false that Telecel has tabled offers to its staff for payment of 20% of salaries in kind, this is an opportunity for the shareholders to pass some equity to staff in a move that not only resolves (partially or totally) the share structure dilemma but goes a more critical route to lobby for employee motivation.