MTN says it is a “follower and reactor player in the market” in South Africa, which, among other things, has led to a decision to retrench up to 14% of its local workforce.
“The company is faced with significant performance challenges that have far-reaching effects among all of its stakeholders (employees, shareholder),” MTN said in a section 189 letter, seen by BusinessTech.
“At this stage, we contemplate that 847 Management layer Employees, across the company are likely to be affected,” MTN said.
In a subtitle within the letter, MTN said it has become a “follower” and “reactor” player in the local mobile market, which has seen the likes of Vodacom, and Cell C in particular, steal market share.
The group pointed to key areas which has led to its decline:
- Defined by competition;
- Uncompetitive in the market;
- Always reactor to the competitors;
- Relative Low product activity;
- Imbalance between price and value.
Earlier this month, the group reported a 7% fall in revenue for its South African operation to R19 billion in interim financial results for the six months ended June 2014, citing increasing competition.
Market share declined by 2.7 percentage points to 31.9% as competition intensified in the pre-paid segment, the group said of its SA operation.
In its section 189 letter, MTN pinpointed number of challenges within its ‘revenue declining business’ including its inability to ‘compete aggressively’, its ‘inconsistent proposition’ and ‘uncompetitive cost structures’ adding that it is ‘perceived as ineffective’.
The group admitted that it is being “outperformed by competitor” which has led to a ‘significant’ drop in market share.
“The company is proactively responding to such challenges by reviewing its operational efficiencies in an effort to rationalise costs wherever possible, support improved revenue-generation and to help position itself for long-term sustainability,” MTN said.