MTN Group blames retrenchment on economic crunch

MTN Group, one of the leading mobile telecommunication operators in Africa, says it plans to lay off both permanent and temporary staff in South Africa, as a result of the decline in the economic environment. It is not clear if any lay offs are in planned for the Nigerian staff of the company.

According to a press statement released on Monday, about 403 permanent employees will be affected by the lay off towards the end of March 2010. The job cut will affect about seven percent of MTN South Africa's 4, 679 permanent employees and 3,000 temporary employees.South Africa's Times newspaper reports that in addition to this lay off, 70 percent of MTN's temporary staff will be retrenched beginning from December 1. According to the MTN Group's human resource executive Temba Nyathi,‘‘the cutbacks were expected to save 150-170 million rand per year."

The reasons for the move

In the statement, the firm stressed that the reduction of costs and the curtailing of unnecessary expenditure throughout all levels in the company is essential for the company during this global financial crunch.The mobile telecoms operator also said the decline in its customer base forced it into taking such cost cutting measures that include not just a trimming of the workforce but also the re-engineering of business operations. "MTN SA is re-engineering its business in response to an outlook of lower growth due to the negative impact of the global recession on consumer spending and RICA compliance issues," the statement said.

The company said it hopes to achieve this by improving delivery, having more effective operations and also faster and more responsive turn around times . The company also said it will centralize support centres and services in order to create economies of scale, integration and consequently greater efficiency. Franchise opportunities will also be available on selected MTN SA outlets, according to the Telecom giant.

MTN is convinced that by doing all this, it will decrease operating expenditure (OPEX) substantially, increase innovation in all segments of the MTN SA and improve on its quality network to MTN SA's customers, in order to retain the existing customer base.

Impact on Nigerian operations

However, MTN Nigeria could not confirm to NEXT if the job cuts in MTN SA will affect the Nigeria unit, insisting that we contact South Africa for a comment or send an email inquiry.

Implications

South Africa is grappling with its first recession in 17 years and so companies are beginning to cut back in order to contain costs.

In August, MTN posted first-half headline earnings per share up 22.5 percent at 415.5 cents.

The country's official job loss rate increased to 24.5 percent in the third quarter of 2009, from 23.6 percent in the second quarter.MTN shares closed down 2.3 percent at 117 rand, lagging behind a 1.71 percent stronger JSE Top-40 index.