CEO 'ready to quit' strike-hit MTN SA after baptism of fire

05 July 2015 - 02:02 By Asha Speckman

Facing a battle to end strike action over bonuses and wages that threatens to spread to its other operations on the continent, Africa's biggest mobile operator, MTN, may soon find itself without a CEO for its home base. CEO of MTN South Africa Ahmad Farroukh is said to be ready to throw in the towel after only 10 months in the job.It is said that Farroukh, who was appointed in August last year, announced his plans to resign at a meeting last month, but his proposal was not officially accepted.Three sources, who include a senior manager at MTN, have confirmed the matter to Business Times.Challenges continue to mount at South Africa's second-largest network operator, which faces a threat of similar protests at its operations on the rest of the continent after Cosatu affiliates this week threatened to extend the strike internationally.Farroukh has not had an easy time at MTN SA, presiding over a cost-cutting programme soon after joining the subsidiary, which had included retrenchments and about 200 managers opting for voluntary severance packages.The focus on cost cutting has been driven by a fiercely competitive domestic market. During the quarter to March, the company reported an 4.8% drop in average revenue per user to R87.16 in South Africa.story_article_left1Farroukh did not respond to e-mailed questions. MTN SA spokeswoman Bridget Bhengu was also not available.MTN's local operations make up 20% of the company's revenue, coming second to Nigeria.Farai Mapfinya, head of equities at JM Busha Asset Management, said: "We think [the strike] is impacting materially on the business.The environment remains benign, [but] competition is intensifying and regulation issues are a concern."In May, scores of Communication Workers' Union members employed at MTN's call centres, reception offices and warehouse disrupted services and the delivery of equipment to stores when they launched the strike, which has turned violent in recent weeks.MTN said in a statement last week that the "Communication Workers' Union had demanded an 8% bonus payment, which MTN agreed to.The company further tabled an additional 8.33% plus 4% for the year 2016, which ramped up MTN's offer to a 12% bonus payment."But this week it said that "MTN has not entered into any agreement with the union".Half of 19 analysts who track the stock still rate it as a "buy".Kate Turner-Smith, equity research analyst at BPI Africa, said the labour ructions would not "move the needle that much" owing to South Africa's contribution to the group, which has operations in 22 countriesThe strike's impact, said Sibonginkosi Nyanga, equity research analyst at Imara SP Reid, would be clearer once the results were published."If the distribution network is affected, it means for this quarter MTN would not have added as many subscriptions as they [otherwise] would have."story_article_right2But, he said: "We're expecting positive numbers coming out of MTN SA."MTN is also dealing with a fierce local price war .Since the September reduction in mobile termination rates - tariffs that mobile operators charge to accept calls on each other's networks - competition between the big three cellular operators has heightened.Turner-Smith said that Cell C, the third-biggest mobile operator, had an aggressive pricing strategy that would lure low-income consumers - but not the big spenders who prized network quality above price.Mapfinya expected the merger between Vodacom and Neotel - which gives Vodacom, the biggest operator, greater advantage in rolling out broadband to business and homes - to make the environment more difficult for MTN.MTN has jumped 5.49% to R233.57 since the year started, compared with a 4.4% gain in the JSE All Share index over the same period...

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