Jobs axe to fall at MTN - TechCentral

Jobs axe to fall at MTN

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As many as 400 jobs may be on the line at MTN South Africa, sources close to the company say, as the telecommunications operator moves to cut costs in a market that has become significantly more competitive.

MTN is considering a number of options as it looks to reduce costs, including headcount reductions and outsourcing certain operational functions, say the sources, who ask not to be named because of their relationship with the mobile operator.

Future job cuts will come on top of a thousand people — mainly external contractors — who were let go between July and December 2013.

South Africa human resources executive Themba Nyathi says the MTN group is “driving a group-wide strategy to respond to challenging market conditions by improving its operational efficiencies and adapting its business model so as to continue expanding its product offering into the digital space”.

“As part of this process, and as announced in our interim results on 7 August, MTN South Africa will continue to review its cost structures, including employee costs, to ensure better alignment with revenue performance and the changing needs of the business and our clients,” Nyathi says.

“To deliver on this commitment, MTN South Africa has begun a process of internal staff consultations on a proposed organisational restructuring for better efficiencies. This process and the proposals are at a very early stage and we will update the market as key decisions are made.”

MTN has come under intense pressure as a price war in South Africa’s mobile industry has gathered pace in the past 24 months.

For the six months to 30 June 2014, the company’s revenue slumped by 7% and its profit margin, measured before interest, tax, depreciation and amortisation, slid by 1,5 percentage points to 33,3%. The company also lost market share.

Cuts to mobile call termination rates — the fees operators charge each other to carry calls between their networks — also hit the local operation hard.

MTN South Africa added 394 000 customers in the second quarter of 2014 after aggressively cutting prepaid tariffs. But this wasn’t enough to counter a decline of 825 000 subscribers in the first quarter as consumers opted for other networks.

Data released this week by JSE-listed Blue Label Telecoms — by far the country’s largest distributor of prepaid airtime — provides insight into the squeeze that MTN is under.

In the six months to end-May, its share of the rand value of outgoing prepaid airtime sales for Blue Label fell to 29% from 32%, while Cell C increased its share from 17% to 19%. Vodacom remained steady at 50%, while Telkom Mobile’s contribution doubled from 1% to 2%.

Blue Label co-CEO Brett Levy said on Wednesday that the fall in MTN’s market share in the past six to 12 months was “significant”.

Though its airtime sales through Blue Label fell by three percentage points in the past six months, the decline over the past year was even more precipitous, tumbling from 36%.

MTN said at its interim results earlier this month that it was “cautiously optimistic” that it has turned the corner in its South African operation after reporting 400 000 net subscriber additions in July.

MTN has been particularly hard hit by the price war in South Africa’s mobile sector. Cell C recently reported that it had grown its market share — measured by active Sims — to more than 18%. The smaller operator’s share of market revenue has, however, not matched the growth in Sim cards it’s enjoyed.

MTN South Africa hit back in the second quarter, slashing its headline prepaid rate to 79c/minute. The cost of calls on its dynamic tariff plan, MTN Zone, have also been cut substantially in the past year.

The company this month replaced its CEO, Zunaid Bulbulia, who has taken on the group chief operating officer role. Ahmad Farrouk, who had been in the group COO role, was moved into the hot seat at the South African operation on 1 August.

In an interview with TechCentral in March, Bulbulia warned that between 400 and 500 jobs could be on the line at MTN South Africa as it sought to trim costs in 2014. He said the cuts would be necessary if communications regulator Icasa went ahead with plans to chop mobile termination rates on 1 April.

Although the high court found that Icasa’s regulations governing the rate cuts were both invalid and unlawful, it ordered that the new rates be implemented anyway in the public interest.

As a result, the rates that mobile operators could charge each other for calls between their networks fell from 40c/minute to 20c. At the same time, smaller operators were given a big leg up through “asymmetry”, which meant their bigger rivals, including MTN, had to pay them significantly more — 44c/minute — for calls.

Both MTN and Vodacom have objected strongly to Cell C benefiting from this regime given that it has been in the market for more than 13 years. Asymmetry is usually only afforded to new operators.  — © 2014 NewsCentral Media

11 Comments

  1. maybe MTN should perhaps do something about their business to become more effective than actually trying to retrench staff. Maybe the cost cutting should start at the executives as well. MTN is definitely lacking in leadership to build the company, but, seems like the way MTN is going will they soon close their doors???

  2. And they claim to fame that they are the employer of choice… and invest in people… but they are now trying to make savings by cutting(or as they call it, restructure) staff salaries to the detriment of the people who has made those fat cat execs and GM’s stinking rich! Those idiots should remember who buttered their bread for them… They need to remember that any companies biggest asset is the staff… screw them over and you screw your profits over…
    All your beautiful executive strategies and plans means nothing without your middle management who takes your pie in the sky fantasies and turns them into practical working realities…
    The President may call a country to war, the troops might fire the guns, but it is the Captains, Lieutenants and officers that keep those troops going and loyal… Break your Officers(middle management) moral and you lost the war before you even fired the first round.
    And so MTN’s downfall begins….

  3. Ofentse Letsholo on

    I feel sad for those that will lose their jobs but don’t feel sorry for MTN.

  4. Analysts might want to consider reflecting on actual size or head count of burgeoning Head Office as well as loads of costs locked into ever expanding Head Office functions

  5. So MTN continues with their huge sponorships and advertising of varied events and sport but slash the head count. Interesting times we live in…

  6. also, look at the size of the executive’s bonuses at the end of the year.
    It is very seldom under R10mil. CEO bonus is in the region on R20mil

  7. MTN cutting heads because of tough market conditions but what about the Executives taking responsibility for there decisions and not being able to come into the market with a more competitive edge, they are not leaders but delayed followers. Now they want to cut heads, who do most of the hard work! They will loose all its good and hard workers and they will suffer!!! Have they had a look at what the GM’s and Executives earn and there benefits? Paid holidays etc

  8. Reality is MTN SA is top heavy, and has been for years. Vodacom have been gradually cutting for the last 5 years, although in a more steady way, and Cell C has cut its staff to the bone. Take a look at MTN’s staff cost to revenue ratio compared to the industry and SA competitors – its unsustainable, particularly when revenues are declining. This has and is still happening in all CSP’s globally, its an industry phenomenon. Those operators that have made the necessary cuts to their operating costs are now much better off and are sustainable in terms of shareholder value. The good old days of double digit growth are over – operators need to grow up .

  9. Tuesday Is Soylent Green Day on

    management misses the boat causing the company to lose huge market share and its the plebs who get shafted…oh to be a company director – no worries, job security, share options and a golden parachute if you really do eff up.

  10. How sad this is. I was one of the 1000 to be chopped in December 2013. The one was for MTN to gain market share is perhaps a little complicated, but not really. Create ‘stickability’. Offer mailboxes to all smartphone subscribers, offer better value for money on contracts, and the BEST way is to keep customers is to better customer service. MTN and the internal attitude has always been one of arrogance internally with staff, and that often shows to clients. THEN, pay the C-level guys smaller bonuses and perhaps cut their chef service and that may reduce some more overheads. There are a number of ways to attract and keep customers, increasing data costs and expiring those data bundles is NOT the way to do it.

  11. Nkosinathi Ngilambile on

    Interesting that the announcement is made days before ICASA makes a proclamation wrt MTR and asymmetry…..This is just point blank politicking if not outright blackmailing by MTN. They know that job losses are a sensitive in SA with unemployment @25%. They want to use this as their tool to fight asymmetry. “If you keep the rates and the asymmetry there will be job losses”. A few lost jobs is immaterial(except for the affected few who I am sure are skilled enough to find work elsewhere) compared to the damage that they are doing to the overall economy.

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