Liquid Telecom SA is embarking on another retrenchment exercise two months after the largest fibre company in Africa announced it was undergoing a “strategic repositioning”.
The strategic repositioning has already resulted in the retrenchment of 100 workers in August.
Although the fibre company is delivering a good set of financial results, it still plans to retrench more workers.
In the year ended 29 February 2020, Liquid Telecom reported revenue growth of 17.5% to $795.7 million (R13.2 billion), while earnings before interest, tax, depreciation and amortisation (EBITDA) rose 15.7%.
“The company is of the preliminary view that it is not competitive in the marketplace and that it is not operating optimally, having regard to its income generation,” explained Liquid Telecom’s interim CEO Craig van Rooyen in an internal company memo seen by TechFinancials.
“Therefore, the company has developed a new operating model to address its technological and structural needs.
“To ensure operational efficiency and improved service delivery to customers, redundancies and duplication must be identified and addressed.”
The memo further states Liquid Telecom contemplates retrenching employees “if all alternatives prove to be unsuccessful.”
“It is difficult to estimate the number of employees who may eventually be retrenched because of the proposed restructuring and efficiency measures, as this is subject to the outcome of the consultation process and other avoidance measures,” says the memo.
“With that in mind, it is estimated that as it is possible that more than 50 employees may be retrenched, and accordingly that will fail within the ambit of a large-scale retrenchment.”
Zimbabwean businessman Strive Masiyiwa owns Liquid Group, Liquid Telecom South Africa, and the Econet Group.
Earlier this year reports suggested the billionaire businessman was trying to sell a stake in Liquid Telecom valued at about $600 million (R9.9 billion), but the coronavirus pandemic apparently hampered the sale.
Sources close to the Liquid Telecom matter say the move to retrench more workers is a bid to support the operations of the parent Liquid Group.
It is believed that Liquid Telecom South Africa pays R80 million a month in management fees to the Liquid Group.
The local Liquid Telecom operation is the only profitable business in the Liquid Group and its consistent cash flow is used to finance struggling operations in 12 countries.
The Liquid Group has set up an office in India, Pune, and already hired low-cost staff to replace retrenched workers at Liquid Telecom South Africa.
These positions, sources reveal, were for 25 service managers and service delivery managers positions.
Asked to comment on its “new strategic imperative”, Liquid Telecom on Thursday afternoon said: “We can confirm that a few employees accepted Voluntary Early Retirement and Voluntary Severance Packages, which was offered to all employees by Liquid Telecom SA.
“This is in line with the consultation process that is being concluded and aims to reach a consensus on appropriate measures to realign our organisation skill sets, which will likely affect some positions.
Responding to suggestions that Liquid Telecom SA pays as much as R80 million a month in management fees to its overseas parent company, the fibre company said: “Liquid Group does not charge management fees to South Africa; there are standard intergroup charges for all offices where Centres of Excellence are located.”
Full response from Liquid Telecom SA
“To realise our new strategic imperative of realigning from a telecom to a technology company, we need new skills mix.
As such, the company now needs to develop people and improve organisational maturity, enabling us to operate in our intelligent technology business.
This strategy will require us to revisit our business model from time to time to generate immediate and sustainable value to our current and future shareholders and exceed our customer expectations to be more competitive in our industry.
We can confirm that a few employees accepted Voluntary Early Retirement and Voluntary Severance Packages, which was offered to all employees by LTSA.
This is in line with the consultation process that is being concluded and aims to reach a consensus on appropriate measures to realign our organisation skill sets, which will likely affect some positions.
Liquid Telecom South Africa is building a new operating model that is fit for the future and best serves our customers needs with new intelligent technologies.
Liquid Telecom can confirm that we do not have any presence in Pune; no existing job within Liquid Telecom South Africa has moved from South Africa to India. All decisions of this nature will be in full compliance of Liquid Telecom South Africa governance and regulations.
Liquid Group does not charge management fees to South Africa; there are standard intergroup charges for all offices where Centres of Excellence are located.