UPDATE 2-South Africa's MTN to cut jobs, says union, as growth stalls

Mon Aug 25, 2014 8:58am EDT

* First-half South African revenue fell 7 pct

* MTN has laid off 138 staff in past 12 months (Adds MTN, analyst comments)

By Helen Nyambura

JOHANNESBURG, Aug 25 (Reuters) - South Africa's MTN Group plans to lay off about 850 managerial staff, a union official said on Monday, as the mobile operator contends with slowing revenue and tough competition in its home market after decades of robust growth.

Africa's largest telecoms group has expanded rapidly across the continent and in the Middle East over the past two decades but faces stiff competition at home from South African market leader Vodacom.

Margins have also been squeezed by a price war launched by smaller operator Cell C and after regulators decided to cut mobile termination rates (MTR) - the fees networks charge each another to connect calls.

"We have just received a massive retrenchment notice at MTN," said Marius Croucamp, an official at the Solidarity union, which largely represents skilled workers.

The process could be concluded by the end of October, he said.

MTN's chief human resources officer Themba Nyathi confirmed that the company had begun restructuring to improve efficiency but said the process is 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 in a statement.

REVENUE FALL

MTN's revenue from South Africa fell by 7 percent to 19.2 billion rand ($1.8 billion) in the first half of this year while margins also declined. Its market share dropped by nearly three percentage points to 31.9 percent.

MTN South Africa has nearly 6,200 employees after letting go 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, head of industry 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 South Africa has directed the telecoms companies to halve their MTRs to 20 South African cents a minute and to reduce this to 10 cents by March 2016.

The cuts come as the companies contend with falling prices and a drop in the use of highly profitable text messaging as growing numbers of people turn to internet applications instead.

The companies argue that the cuts will serve to drag on much-needed capital just when the industry faces huge investments in newer and faster networks.

MTN's shares were down 1.7 percent at 1220 GMT. ($1 = 10.6920 South African Rand) (Editing by David Goodman)

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