The current wave of retrenchments within the local telecoms industry is a "natural progression" and set to continue, as the heady days of unbridled growth and profits are over, say market observers.
Mobile giant MTN is the latest operator to confirm it is looking at shedding jobs amid a tough operating environment, alongside Telkom, which is already in the process of retrenching a large portion of its managers as it seeks to trim costs.
This morning, MTN stated it is driving a group-wide strategy to respond to challenging market conditions, by improving its operational efficiencies and adapting its business model to continue expanding its product offering into the digital space.
"As part of this process, and as announced in our interim results on 7 August 2014, 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," says Themba Nyathi, chief human resource officer.
"To deliver on this commitment, MTN SA has begun a process of internal staff consultations on a proposed organisational restructuring for better efficiencies. This process and the proposals are at a very early stage and we will update the market as key decisions are made."
Nyathi points out this is "part of the ongoing process of renewal that allows the company to deliver the strategic investments, product innovations and new services our customers expect and so ensure MTN's sustained competitiveness in this rapidly evolving market".
While MTN did not provide numbers, media reports have suggested that as many as 400 employees could be shown the door.
'Sad, but not surprising'
Telkom is well on its way to trimming what could eventually add up to more than 2 500 employees - mainly at managerial level. The company is currently in the first phase of its organisational restructuring, following consultations with labour unions.
During this phase of the process, Solidarity and the Communications Workers Union have confirmed that 357 Telkom managers would get the axe.
Richard Boorman, executive head of corporate communications at Vodacom, this morning stated the company is "certainly focusing on managing costs", but it does not have any plans "when it comes to job cuts". Cell C did not respond by the time of publication.
Meanwhile, market watchers say the current spate of retrenchments is not surprising, but rather a natural progression of the evolving market, and add that they expect retrenchments to continue - at least in the short term.
Ovum analyst Richard Hurst says the heady days of the telecoms gold rush - as seen in the early 2000s - are over and telecoms players need to focus on their core business. "This is a natural consequence of evolution in this sector. Companies are having to trim costs via various means, including outsourcing infrastructure and services, especially in the current environment where telcos are involved in a price war."
However, Hurst warns against looking at cost pressures in isolation, saying it's easy to point fingers at lower mobile termination rates, but says such factors are not solely to blame. "I would say it's more about general competition in the space - market share and operational efficiencies."
Rise of the machines
Independent telecoms analyst Spiwe Chireka agrees that downsizing is the result of natural progression, and says the current era of digitalisation and automation also means fewer employees are needed by telcos.
"If you look at the current growth pattern of the telecoms industry, it has been slowing for the past three to four years. Yet, operators need to meet the expectation of shareholders and customers, so the top line is coming under increasing pressure."
At the same time, she says, investment in network infrastructure needs to continue, so companies are naturally looking to staff numbers to trim fat. "It's really no surprise. Companies have many options when it comes to staff numbers - they can look at outsourcing or managed services, for instance."
Chireka expects this trend to continue in the short term. "I expect a lot more job shedding, as there is huge pressure for the operators to achieve acceptable margins."
Belt-tightening phase
The cyclical nature of business, within every industry sector in the world, means the current job shedding in local telecoms is to be expected, says BMI-TechKnowledge analyst Brian Neilson. "The local telecoms sector is out of the growth cycle and in the belt-tightening phase, while the market is generally mature," he says.
Like Hurst, Neilson also warns against pinning the current situation on any particular factor, saying the much-maligned lower interconnect rates are but one factor adding more pressure to an already tough market.
"Growth within the sector, even subscriber growth, is coming off. Voice revenue has been hit harder, but even data revenue is under pressure, and this is unlikely to change unless companies can reinvent themselves and find some new sources of growth. The 20 years of growth are over for this sector. I suppose you could call these the lean years."
Share