About 150 Cell C staff stand to lose their jobs, as the mobile sector becomes increasingly cut-throat and operators vie with each other for a larger share of a saturated pie.
Cell C has embarked on a restructuring process that could see more than 10% of its staff in the firing line as it seeks to become more competitive in a heavily-contested market. The operator, which has 13% of the market with nine million subscribers, wants to grow its base to 25% of South African subscribers.
It recently fired the fifth salvo in its price war when it cut international calls by 91%, to 99c. That move followed a 99c a minute, per second billing, prepaid offer, which Vodacom was quick to follow.
SA's mobile sector has passed saturation point with an estimated mobile penetration of 132%. Average revenue per user has declined in the prepaid segment - the bulk of the market - and cellular companies are being forced to become more efficient.
In consultation
Cell C, which has 1 288 permanent and fixed-term employees, started consulting with staff this week. Cell C's executive head of communications, Karin Fourie, says, currently, subject to consultation with the affected employees, about 150 employees could be retrenched.
“As we have not completed the consultation process with the affected staff, we are not in a position to provide any further information.”
Fourie says retrenchments will become effective after the legislated consultation process has been completed and the affected employees have been given notice. Notice periods may vary, depending on employment contracts, she says.
Affected staff will be assisted with provident claims and Cell C has arranged financial and emotional counselling through external vendors, as well as advice and guidance from recruitment agencies, notes Fourie.
No surprise?
New CEO Alan Knott-Craig Snr hinted at a possible restructuring when news of his appointment was announced in January. He said a reorganisation would stand Cell C in good stead to achieve its various marketing, financial and customer-related goals.
“The company must be in top shape if it is to do well against other companies in the industry,” said Knott-Craig. He added that Cell C aimed to add at least another five million subscribers to its base in the next few years, and later said he wanted 25% of the market.
Strategy Worx MD Steven Ambrose says this is a case of a new broom sweeping clean as Cell C overhauls its business to get rid of any accumulated inefficiencies as the industry is in a cycle that is cut-throat.
Ambrose explains that churn within the sector is increasing and consumers are price, not brand, loyal. He says the restructuring is a consequence of the current mobile war, as operators vie for subscribers in a time when spend is declining and operators seek to eke out more efficiencies.
The mobile war will result in all the operators seeking more ways of trimming their cost base, says Ambrose. Vodacom CEO Pieter Uys recently said the company still had scope to improve its margins through cutting spending and his concern is keeping the company profitable. Vodacom trimmed its publicity expenses 13.5% in the year to March.
Backlash
However, trade unions argue that the sector cannot afford to lose more jobs. Recently, Nokia Siemens Networks said it would trim its South African workforce by about 160 people as part of its global bid to restructure the company and implement a new strategy.
South African Communications Union (SACU) president Michael Hare says ICT is a growing sector and one that has been earmarked by the Department of Communications as key to boosting the economy.
“This is bad news... I can't understand why they are retrenching, it's unacceptable.”
SACU, which has about 12 members at Cell C and cannot bargain collectively, will call on its affiliated body, the Federation of Unions of SA (Fedusa http://www.fedusa.org.za/), to boycott Cell C's services in a bid to save jobs, says Hare. Fedusa has more than 500 000 members.
Solidarity deputy general-secretary Dirk Hermann says the retrenchments are part of the fallout from the competition wars in the sector.
Hermann explains that cutting staff is the easiest way to trim costs in the telecommunications sector where union density is low. He says Solidarity is concerned over instability in the IT sector as there has been an increase in retrenchments.
Solidarity has about 100 members at Cell C, but does not have a big enough base to be seen as a recognised union and cannot bargain on a collective base. Hermann says it will take up individual cases and fight retrenchments in the labour courts.
Hermann says companies are meant to consult with union representatives before embarking on a retrenchment process.
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