There are growing concerns that the year 2014 will see significant job cuts from the ranks of an estimated 10,000 employees of telecom companies operating in Nigeria.
This is because the companies plan to further outsource the management of their core networks to equipment manufacturers as well as sell off their Base Transceiver Stations (BTS) to tower operators in 2014, industry insiders have said. They add that this will result in the shedding of a long train of direct staff and contractors.
The purpose of the outsourcing is to enhance margins by streamlining operations, BusinessDay learnt.
The telecom operators are increasingly adopting innovative cost-optimisation strategies to free up requisite resources for service and marketing-oriented activities and transform business models to further compete more effectively.
This move, analysts say, has become imperative in view of the need for telcos to enhance market share, revenue and EBITDA (Earnings Before Income Tax Depreciation and Amortisation) margins in an increasingly competitive environment. Falling voice tariffs, an offshoot of aggressive competition, is also biting deep into operators’ revenues.
Segun Ogunsanya, chief executive officer, Airtel Nigeria, however, says he does not think that this new operational direction will lead to retrenchment of staff.
“A few years ago, when we outsourced our call centres, the fear was that it would lead to staff retrenchment. The reverse is the situation, as many more people work in our call centres today. Selling towers will not lead to job loss. Running of the towers will be transferred to a separate organisation that knows how to do it well,” said Ogunsanya in an interview.
According to him, outsourcing would allow telcos to concentrate on their core area of competence, which is delivering superior telecoms services.
Kamar Abass, managing director, Ericsson Nigeria, attests to the fact of a growing number of managed services and outsourcing deals in the telecoms industry.
“We ended the year with a very big deal with MTN on managed service,” Abass said in an interview, adding that the deal was a harbinger of an important change in the industry.
In January, Etisalat Nigeria also signed a major Information Technology (IT) outsourcing deal. This, said Abass, is an indication of where the telecoms industry is going in terms of getting third-party support and engagement.
“We are building a formidable ecosystem in the telecoms space where we have major companies taking a significant part of the undertakings that were for a long time considered in-house and core activities of the mobile operators,” he added.
Bharti Airtel plans to sell most of its transmitter towers in Africa in a process that could raise up to $2 billion for the telecom operator, as well as help reduce its debt.
Airtel, which entered Africa with the $9 billion acquisition of the operations of Kuwaiti telecom group, Zain, on the continent in 2010, has already launched a sale process for its towers in Nigeria, two banking sources familiar with the process said.
Building and maintaining towers in Africa is typically more expensive than in other regions. This is largely due to high security costs and epileptic power supply, which often require cell sites to be powered by multiple generators. In 2012 alone, operators spent about N45.9 billion to fuel generators that power about 20,000 sites nationwide. Security officials monitoring towers also estimate that around 15-20 percent of total diesel consumption is pilfered. These operational challenges have prompted telcos to sell or lease towers to specialist firms such as Helios Towers and IHS.
“While other telecom operators have sought to offload towers in Africa because of the inherent difficulty in operating them, Bharti has the added reason of reducing their debt burden, most of which was taken up for the Zain acquisition,” one of the banking sources said. The company had a reported net debt of 638.4 billion Indian rupees on March 31, 2013.
Mobile penetration in rural Nigeria is relatively low, with analysts adding that a prime attraction for tower firms is to build new sites to reach unserved and underserved areas. Airtel is Nigeria’s third-largest telecoms operator, with a 19 percent share of mobile subscribers, according to the telecoms regulator, and some of its rival telecoms firms are also planning tower sales.
Etisalat Nigeria, a unit of the UAE’s Etisalat, has appointed South Africa’s Standard Bank as adviser. Market leader, MTN Nigeria, is also a potential seller, but Bharti Airtel’s sale appears the most advanced.
Prospective buyers are in the midst of conducting diligence, according to informed sources. Industry analysts told BusinessDay that any telecoms companies that sell first would have considerable first-mover advantage.
Etisalat Nigeria is estimated to have around 2,500 telecoms towers in Nigeria; Bharti 6,000; and MTN 9,000.
MTN last December agreed to sell, for an undisclosed amount, 1,228 towers in Rwanda and Zambia to IHS Holding Limited. The sale of the towers, according to industry insiders, is in line with MTN’s asset optimisation strategy, which is encompassed in its new strategic framework and builds on two previous deals with IHS in Cameroon and Côté d’Ivoire, for a total of 1,758 towers.
“In sub-Saharan Africa, especially Nigeria, the rising cost of doing business is becoming a source of concern to telecom operators and stakeholders alike, with increase in expenditure and constant reduction in profit margins,” said Chidi Esonwune, a telecoms expert.
By: Ben Uzor Jr
