Cell C may lay off 40% of employees
Cell C has confirmed that it has begun the preliminary process of cutting jobs at the mobile operator, in a bid to streamline its operations, with 40% of posts reportedly on the line.
On Friday, SA’s third largest mobile operator said it “has reached a difficult decision and initiated discussions with junior management and semi-skilled staff to implement a restructuring of its operations so as to align the organisation with its new operating model”.
Earlier this year, senior management positions were aligned to this revised operating model and new organisational structure, Cell C said. The process was completed in May and resulted in 30 positions being affected.
About 40% of jobs or 960 positions out of 2,500 may be on chopping block.
The company has struggled to turn a profit since its founding in 2001. In March, CEO Douglas Craigie Stevenson said Cell C had started negotiations with staff that were initially expected to be completed at the end of April.
Efforts to streamline the business as part of its turnaround strategy have included cost savings through procurement cuts, a year-long hiring freeze, a review, and discontinuation of certain products.
“It is the company’s view that, over time, the operating model has resulted in a number of inefficiencies. This is contributing to the operating and financial challenges the company currently faces,” it said.
Cell C said that while the company has started a section 189 process, it is also looking at a number of ways to re-skill some of the affected employees. The real question now is how much the move will cost the operator.
Fixed-line operator Telkom is expected to report a more than 60% drop in earnings for the year to end-March, driven by expected coronavirus-related losses and the costs of its restructuring programme.
Earlier this week, the company said reductions in earnings are mainly due to one-off costs of about R1.2bn relating to its restructuring programme.
The group had planned to retrench 3,000 employees, about 20% of its workforce, but delayed the process because of the Covid-19 pandemic that resulted in a national lockdown. Cell C has also struggled under a mountain of debt for years.
Last month, the Competition Tribunal conditionally approved the proposed transaction in which Gatsby special purpose vehicle (SPV) intends to acquire certain Cell C assets.
This brings it one step closer to finalising its recapitalisation programme aimed at addressing the company’s almost R9bn long-term debt burden.
Such a recapitalisation will likely see Gatsby SPV, whose owners remain anonymous, taking up an equity stake in Cell C. It is widely expected that the Buffet Consortium, led by billionaire Jonathan Beare, will take up that stake.
Cell C said no final decision has been made on the retrenchments and the consultation process with affected employees “is meant to obtain input for consideration before a final decision is made”.