Johannesburg - MTN, the continent’s largest cellular network provider, is weighing up job cuts as cost optimisation becomes a key focus over the remaining months of the financial year to December.
Staff numbers across the group’s 22 operations in Africa and the Middle East were under review, new group chief financial officer Brett Goschen said yesterday.
In South Africa, MTN could rationalise the outsourced portion of its labour force as opposed to permanent staff, Zunaid Bulbulia, the chief executive of MTN South Africa, said in a briefing after the announcement of results for the six months to June.
Themba Nyathi, MTN SA’s human resources executive, said: “About 15 percent of MTN SA’s staff are contractors who perform, among others, outsourced functions. As we rationalise and automate certain areas of our business in pursuit of operational efficiencies, some contract functions will naturally become redundant while others will be carried out in-house.”
But Goschen and Bulbulia would not be drawn into details. Distribution, supply chain and procurement are other areas to be targeted.
The attention to costs comes from the realisation that the firm has to improve its agility in a cut-throat operating market characterised by global economic and regulatory pressure and competitive pricing, while it is also searching for value-accretive acquisitions.
Group revenue jumped 9.8 percent to R65.2 billion in the six months as subscribers increased by 6.5 percent to a milestone 201.5 million.
In South Africa, weaker consumer demand and the company’s slow response to aggressive price competition in voice and data rates led to a marginal decline of customers to 25 million from 25.4 million at year-end in December last year. Blended average revenue per user declined by 13.3 percent to R105.40 from R121.52 last June.
“The slowdown in South Africa is expected as mobile penetration moves well above 100 percent and the country reaches saturation,” Aslam Dalvi, an equity analyst at Kagiso Asset Management, said.
“With limited subscriber growth and tariff pressure from regulation and competition, it will be difficult to grow voice revenues in South Africa and mobile companies will need to focus on managing costs to ensure profitability can be maintained.”
MTN reported a 12.5 percent year-on-year jump in operational expenditure to R37.5bn for the six months under review. The rise was driven by an 8.5 percent increase in direct network costs, a 7.6 percent rise in interconnect and roaming costs and a 15.2 percent hike in selling, distribution and marketing expenditure.
Employee benefit costs adjusted for annual inflation and an increase in headcount jumped 22.2 percent to R4.2bn.
Dalvi said MTN was well positioned in Africa, in key markets such as Nigeria and in Ghana, where penetration was still below 100 percent and average spend on cellular telephony was low.
“Notwithstanding high levels of competition in these markets, the growth prospects for these markets, which account for more than 70 percent of MTN group [earnings] remains attractive,” he added.
Group data revenue jumped 36.9 percent to R9bn. Operating profit inched up to R19.5bn from R19.1bn a year earlier.
Sifiso Dabengwa, the MTN Group chief executive, said: “The core issue over the last two years has been a significant price erosion. Our view is there probably isn’t much space for further significant price decrease.
“For us to improve on operating performance we will have to focus on costs and creating and generating new revenue from new services has to be a key focus. There is not much room for competitors who think their core strategy is going to be around pricing.”
MTN gained 1.55 percent to R199 on the JSE yesterday. - Business Report