MTN South Africa would lay off about 850 managerial staff, Solidarity said yesterday.
Africa’s largest cellular service provider has grown rapidly across the continent and the Middle East in the past two decades but faces stiff competition at home from Vodacom.
Margins have also been squeezed by a price war launched by smaller rival Cell C and after regulators decided to cut mobile termination rates – the fees networks charge each another to connect calls.
“We have just received a massive retrenchment notice at MTN,” Marius Croucamp, an official at Solidarity, said.
The process could be concluded by the end of October.
MTN’s chief human resources officer, Themba Nyathi, confirmed that the company had begun restructuring to improve efficiency but said the process was at an early stage. “MTN SA 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,” he said.
Nyathi said to deliver on this commitment, MTN had begun internal staff consultations on a proposed restructuring for better efficiencies. This process and the proposals were at a very early stage and MTN would update the market as key decisions were made.
“This is part of the ongoing process of renewal that allows us to deliver the strategic investments, product innovations and new services our customers expect and so ensure MTN’s sustained competitiveness in the rapidly evolving market,” said Nyathi.
MTN’s revenue from South Africa fell by 7 percent to R19.2 billion in the first half of this year, while margins also declined. Its market share dropped by nearly 3 percentage points to 31.9 percent.
MTN SA has 6 200 staff after axing 138 in the past 12 months.
“It’s certainly a symbol and a symptom of MTN’s struggle to maintain market share in South Africa,” said Arthur Goldstuck, the head of research firm World Wide Worx.
“It’s a reflection of the pressure on its margins as mobile termination rates come down dramatically and also as it is forced to compete on price on both data and voice.”
The Independent Communications Authority of SA has directed MTN and Vodacom to halve their mobile termination rates to 20c a minute and to reduce this to 10c by March 2016.
The cuts come as the firms contend with falling prices and a drop in the use of text messaging as people turn to internet applications instead.
The firms argue that the cuts will serve to drag on much-needed capital just when the industry faces huge investments in newer, faster networks.
MTN’s shares fell 1.6 percent to close at R243.02 on the JSE yesterday. – Reuters, with additional reporting by Wiseman Khuzwayo