Crisis at MTN claims scalp of Farroukh

FILE:200615 MTN bonus strike at their head offices in Fairlands West of Johannesburg.MTN SA CEO Ahmad Farroukh reading the employees demands before signing,CWU Deputy General secretary Thabo Mogalane(C) and CWU President Clyde Mervin .photo by Simphiwe Mbokazi

FILE:200615 MTN bonus strike at their head offices in Fairlands West of Johannesburg.MTN SA CEO Ahmad Farroukh reading the employees demands before signing,CWU Deputy General secretary Thabo Mogalane(C) and CWU President Clyde Mervin .photo by Simphiwe Mbokazi

Published Jul 7, 2015

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Sechaba Nkosi

MTN SOUTH Africa chief executive Ahmad Farroukh yesterday became the first casualty of the worst crisis that has hit the giant cellular company in more than 20 years of operating history in the country.

Farroukh, 54, abruptly resigned yesterday ending months of speculation that he was going owing to the loss of lucrative corporate contracts and a wage strike that had negatively affected services at the country’s second largest cellular operator.

MTN insiders yesterday told Business Report that Farroukh fell because of the loss the company had suffered after surrendering the market share to rival operators.

“We knew it was coming but we never expected it this soon,” said one of the sources.

Lost ground

“The reality is that we lost ground in the market, while we had forecast our projections on a stable market. When the decision to cut interconnect rates between mobile networks came and the strike at our call centres hit, it was all over for him.”

Farroukh joined MTN with the acquisition of Investcom in 2006. He held several leadership positions within the group, serving as chief executive of the company’s Nigerian and Ghanaian operations.

Farroukh also acted as the group chief operating officer and vice-president of the West and Central Africa region.

MTN group chief executive Sifiso Dabengwa said in a statement yesterday that Farroukh’s successor would be announced as soon as the new appointment was finalised.

“This was a difficult decision to take for Ahmad, but unavoidable due to personal and family reasons,” said Dabengwa.

Flagship brand

MTN, which was once a flagship brand of South African companies with an international footprint in Africa and the Middle East, shook the market yesterday with the share price going down by 2.2 percent as the market reacted to the news of the resignation.

The company’s shares closed 2.77 percent down at R227.09.

David Shapiro, the vice-chairman of Sasfin Securities, said the MTN share lost ground yesterday as Nigeria’s economic pressure and the ongoing strike weighed heavily on the stock.

Analysts believe that Faroukh’s sudden resignation is a result of negatives on the MTN balance sheet following the reduction in termination rates – fees that companies charge each other to connect calls among their networks – have plunged.

Last year the company embarked on a major restructuring drive that saw it cutting costs by retrenching hundreds of managers to return to profitability.

Disappointing

The company said it was making the changes after disappointing results that saw it lose customers.

The Communications Workers Union, which has been behind the strike that is now into its eighth week, was not immediately available for comment.

The strike started on May 20.

First Avenue Investment Management analyst Nadim Mohamed said the strike by MTN SA workers cost the company dearly as telecommunication companies were not used to prolonged strikes.

Mohamed said even loyal subscribers and customers had begun to review their relationship after some of the call centres stopped operating and they could not receive assistance from MTN SA.

“Call centre agents were used to being paid a good bonus and when they went on strike after these were cut, people began to look elsewhere for services,” said Mohamed.

“So in the whole, MTN was not functioning well and they could not turn their business around in the face of stiff competition from other operators.”

Sibonginkosi Nyanga, an analyst with Imara SP Reid, said Farroukh’s resignation came as no surprise as the company’s South African subsidiary had hit hard times in the past year.

The declining subscriber numbers in the quarter to March as average revenue per user dropped and the strike have been major challenges for the company .

Nyanga said that the company would be in a position to fill Farroukh position.

“MTN is not unravelling... In terms of depth, they (MTN) will be able to replace Farroukh,” he said.

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