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THE era of secure and comfortable jobs for the workers in South Africa’s telecoms sector may be over, because MTN is considering retrenching some of its managers.
READ: MTN to cut nearly 850 managerial jobs - union
Until now South Africa’s telecoms operators have prided themselves on being great companies to work for, especially because they reward employees with short- and long-term incentives.
In recent times, the likes of Vodacom, MTN and Telkom have positioned themselves as employers of choice with the ability to attract talented telecoms experts.
This positioning has also enabled them to attract top telecoms executives. They have even enticed regulators to cross the floor to join them. There are indications that regulators are still eyeing high-paying positions in the telcos.
However, on Monday August 25 union Solidarity disclosed that MTN is planning to cut about 850 managerial positions owing to tough competition in the country.
The process of retrenchment could be concluded by the end of October, said Solidarity.
This development comes on the back of Telkom’s announcement that it plans to cut R1bn in costs every year for the next five years.
Read: Telkom faces court action over planned job cuts
The company said it is not targeting a specific number of individuals – instead, it aims to reduce the number of management layers and achieve an employee cost to revenue ratio of 25% over the next five years.
Employee costs currently make up 30% of Telkom’s revenue.
Telkom said the objective was to “bring leadership closer to customers by removing unnecessary layers of management", which will ultimately improve customer service and experience.
Vodacom, which is in the advanced stages of buying Neotel, is likely to chop managers in both companies when the deal is finalised.
Meantime, smaller cellular operator Cell C is believed to be retrenching quietly, away from the scrutiny of the markets.
Not only are such retrenchments in the offing, but mobile phone operators are also trying hard to fend off regulatory pressures.
Already feeling the heat, cellular operators have taken industry regulator Icasa to court to stop it from reducing mobile termination rates (MTR) – the fees charged by mobile and fixed phone companies to handle calls from other providers.
Read: MTN drops call rate, takes fight to Cell C
Telcos have warned of more job cuts if the reduction in MTR is enforced.
This puts a damper on employment security for telecoms workers in a country where retrenchments are fast becoming the order of the day.
Local banking, mining and automotive sectors have been experiencing retrenchments since 2009 and many of the industries are still facing the predicament of ongoing restructuring to reduce costs.
The maturity of the South African telecoms market, intense competition and regulatory challenges are also likely to put more pressure on employee costs for telcos.
As it is, Vodacom, MTN, Cell C and Telkom are spending millions of rand to undercut each other with aggressive discounts to defend and build market share. They are also ploughing billions of rand into upgrading and expanding their network infrastructures.
If things stay the same or get worse in the next few months, telcos might find themselves having to choose between declaring smaller dividends for their shareholders and sacrificing more jobs.
Fragile economy bleeding jobs
Clearly the more telcos are squeezed, the greater the likelihood that workers are going to lose their jobs in big numbers. The situation could be further exacerbated by more mergers and acquisitions.
This is not good for South Africa’s fragile economy, which is bleeding jobs every month.
The unemployment rate increased by 0.3% between the first and second quarters of 2014 to reach 25.5%, Statistics SA said in July. The economy cannot afford to shed more jobs.
But jobs cuts in the telecoms sector are not likely to ease anytime soon; Telkom and MTN are likely to retrench more workers if their deal is approved by regulators. Telkom has signed a heads of agreement with MTN to take over financial and operational responsibility for the roll-out and operation of its radio access network.
Furthermore, Telkom is also set to pay R2.7bn for fast-growing technology group Business Connexion, subject to regulatory approval.
This is also likely to result in retrenchments once the deal is finalised and Telkom makes assessments of the newly-acquired business.
Telecom workers need to brace themselves for tough times ahead.
- Fin24
*Gugu Lourie is a former correspondent for Thomson Reuters, Business Report, Finweek magazine and Fin24 (writing a blog titled 'Googled'). He is the editor of techfinancials.co.za. Views expressed are his own. Follow him on #twitter @LourieGugu.
READ: MTN to cut nearly 850 managerial jobs - union
Until now South Africa’s telecoms operators have prided themselves on being great companies to work for, especially because they reward employees with short- and long-term incentives.
In recent times, the likes of Vodacom, MTN and Telkom have positioned themselves as employers of choice with the ability to attract talented telecoms experts.
This positioning has also enabled them to attract top telecoms executives. They have even enticed regulators to cross the floor to join them. There are indications that regulators are still eyeing high-paying positions in the telcos.
However, on Monday August 25 union Solidarity disclosed that MTN is planning to cut about 850 managerial positions owing to tough competition in the country.
The process of retrenchment could be concluded by the end of October, said Solidarity.
This development comes on the back of Telkom’s announcement that it plans to cut R1bn in costs every year for the next five years.
Read: Telkom faces court action over planned job cuts
The company said it is not targeting a specific number of individuals – instead, it aims to reduce the number of management layers and achieve an employee cost to revenue ratio of 25% over the next five years.
Employee costs currently make up 30% of Telkom’s revenue.
Telkom said the objective was to “bring leadership closer to customers by removing unnecessary layers of management", which will ultimately improve customer service and experience.
Vodacom, which is in the advanced stages of buying Neotel, is likely to chop managers in both companies when the deal is finalised.
Meantime, smaller cellular operator Cell C is believed to be retrenching quietly, away from the scrutiny of the markets.
Not only are such retrenchments in the offing, but mobile phone operators are also trying hard to fend off regulatory pressures.
Already feeling the heat, cellular operators have taken industry regulator Icasa to court to stop it from reducing mobile termination rates (MTR) – the fees charged by mobile and fixed phone companies to handle calls from other providers.
Read: MTN drops call rate, takes fight to Cell C
Telcos have warned of more job cuts if the reduction in MTR is enforced.
This puts a damper on employment security for telecoms workers in a country where retrenchments are fast becoming the order of the day.
Local banking, mining and automotive sectors have been experiencing retrenchments since 2009 and many of the industries are still facing the predicament of ongoing restructuring to reduce costs.
The maturity of the South African telecoms market, intense competition and regulatory challenges are also likely to put more pressure on employee costs for telcos.
As it is, Vodacom, MTN, Cell C and Telkom are spending millions of rand to undercut each other with aggressive discounts to defend and build market share. They are also ploughing billions of rand into upgrading and expanding their network infrastructures.
If things stay the same or get worse in the next few months, telcos might find themselves having to choose between declaring smaller dividends for their shareholders and sacrificing more jobs.
Fragile economy bleeding jobs
Clearly the more telcos are squeezed, the greater the likelihood that workers are going to lose their jobs in big numbers. The situation could be further exacerbated by more mergers and acquisitions.
This is not good for South Africa’s fragile economy, which is bleeding jobs every month.
The unemployment rate increased by 0.3% between the first and second quarters of 2014 to reach 25.5%, Statistics SA said in July. The economy cannot afford to shed more jobs.
But jobs cuts in the telecoms sector are not likely to ease anytime soon; Telkom and MTN are likely to retrench more workers if their deal is approved by regulators. Telkom has signed a heads of agreement with MTN to take over financial and operational responsibility for the roll-out and operation of its radio access network.
Furthermore, Telkom is also set to pay R2.7bn for fast-growing technology group Business Connexion, subject to regulatory approval.
This is also likely to result in retrenchments once the deal is finalised and Telkom makes assessments of the newly-acquired business.
Telecom workers need to brace themselves for tough times ahead.
- Fin24
*Gugu Lourie is a former correspondent for Thomson Reuters, Business Report, Finweek magazine and Fin24 (writing a blog titled 'Googled'). He is the editor of techfinancials.co.za. Views expressed are his own. Follow him on #twitter @LourieGugu.
