There’s no cheer this Christmas for Neotel employees. The operator has notified staff that retrenchments are looming, blaming the weak global economy for the move.
But company insiders say Neotel, which has more than 1 000 employees, has sailed into troubled waters and a shake-up in senior management is imminent.
The planned retrenchments reinforce a widely held view that Neotel, which is controlled by India’s Tata Communications, is struggling to make headway in what has become a highly competitive telecommunications market.
Company insiders, speaking to TechCentral this week, say senior executives’ heads could roll soon. Already, the company’s debt providers — they include Nedbank Capital, Investec Bank and the Development Bank of Southern Africa — have brought in independent management consultants to assess the situation.
TechCentral has a copy of a letter sent to Neotel employees by human resources managing executive Lucky Ndwalaza this week, in which the company warns it needs to lay off staff to ensure its “long-term sustainability”.
In the letter, Ndwalaza says Neotel will consult with staff in January and the first three weeks in February, with retrenchments likely to follow on 30 April. The company proposes to pay retrenched staff one week’s remuneration for every year of service completed.
The letter, the veracity of which has been established by TechCentral, does not spell out how many employees will be affected by the planned retrenchments.
Neotel, which is controlled by India’s Tata Communications, was licensed about five years ago as SA’s second national network operator, meant to compete directly with incumbent Telkom.
Though it’s had some success in the corporate and wholesale markets, it has failed to make much of a dent in the retail consumer market.
Arthur Goldstuck, MD at research firm World Wide Worx, says the market has the impression that Neotel is not active or aggressive enough. “I can’t see anyone at Telkom shivering in their boots about Neotel’s positioning in the market.”
Goldstuck says Neotel “hasn’t demonstrated a clear vision for being a national network operator”, though he says the company can be turned around with the right focus.
Ndwalaza says in the letter to Neotel staff that “it is evident that a realignment and rightsizing of headcount is required in order to ensure the company is competitive in the marketplace, is able to meet its targets, and ensure an optimal cost-to-revenue ratio”.
“In light of the global recession … the company has evaluated its performance, efficiency and competitiveness with a view to ensuring that long-term sustainability is achieved,” Ndwalaza says.
“The company is of the preliminary view that it is not sufficiently geared to meet the challenges brought on by the global recession and the highly competitive marketplace in which it operates.”
A senior Neotel source says Tata Communications CEO Srinath Narasimhan, who chairs Neotel’s board, has become actively involved in the day-to-day running of the company and is spending more time in SA than in India, where he is based.
Neotel CEO Ajay Pandey was not immediately available for comment. However, the company has issued a statement on the planned retrenchments and restructuring.
The statement reads: “Neotel is in the process of evaluating its business strategy, operational performance, efficiency and competitiveness with a view to ensuring that long-term sustainability is achieved.
“The executive committee and the board are working to ensure that Neotel is sufficiently geared to meet the challenges brought on by the highly competitive marketplace in which it operates.
“As a consequence, the company is considering realignment and restructuring options in order to achieve optimal growth, operational efficiency and improved service delivery to customers.” — Duncan McLeod, TechCentral
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