Airtel Kenya sends home 60 workers as competition in telecoms hots up

Airtel Kenya has fired 60 employees in the latest retrenchment to hit the highly competitive telecoms industry. The mobile operator, owned by Indian tycoon Sunil Mittal, said it is sending home the staff in a strategic restructuring that could re-position the business to profitability.

Airtel Kenya CEO Adil El Youssefi

"The exercise, which is focused on aligning the company's structure with its operating model, also entailed a right-sizing that impacted 60 members of our current workforce," Airtel Kenya Chief Executive Officer Director Adil El Youssefi said in a statement released late Friday.

Airtel Kenya, which is a distant second in terms of market share, is following in the footsteps of Telkom Kenya that recently announced a plan to fire 500 employees from its 1,600-strong workforce. This is ahead of the planned sale of Orange's 70 per cent stake in the firm to Helios Investment Partners.

Airtel said one of the objectives of the restructuring is to create a high-performing organisation, which satisfies the needs of stakeholders, as it steps into the next growth phase.

Mr Youssefi said the affected staff have been compensated above what is prescribed by prevailing laws, besides being offered job search services and training to assist them with the transition.

"The Company will meet the full cost of this support," Youssefi added.

This is the second retrenchment wave to hit Airtel, which entered the African market in 2010 through the acquisition of Zain Africa operations. Last year, Airtel Africa sacked 38 of its employees when it relocated to the Oval Building in Nairobi's Westlands from Parkside Towers. At the time, Airtel Kenya was not affected.

There have also been reports that Airtel is planning to exit the continent after failing to meet its targets, which Youssefi moved to dispel. Bharti Airtel has already sold some operations in West Africa.

"Airtel is definitely in Kenya for the long term and has committed significant investments of over Sh20 billion over the next two years to drive innovation, network quality and customer service delivery. The company also supports the youth in education through its CSR programme that offers free Internet to schools, having covered over 160 schools and 220,000 students all over Kenya," he said.

Last week, France's Orange announced it had bought Bharti Airtel's Burkina Faso and Sierra Leone segments, which have a combined annual revenue of 275 million euros (Sh30.7 billion).

The sale is part of ongoing negotiations initiated in July, and did not include Chad and Congo-Brazzaville, part of the earlier talks, as agreements regarding the potential sale in the latter two countries have lapsed. The company did not disclose the deal size, but analysts estimate it at around $900 million (Sh92 billion).

Analysts estimate the total sale proceeds for the four countries to be around $1.2 billion (Sh122.7 billion). The four account for revenues of 15-16 per cent of the consolidated African business, with Bharti being the largest player in Burkina Faso and number two in the other three nations.

The move to sell some of the most profitable African assets had been taken as a signal that Bharti Airtel was ready to exit Africa. However, the company denies this. Africa accounts for about 26 per cent of the firm's consolidated revenues.

Performance of the African operations has been below par partly due to a slowdown in these countries, triggered by falling commodity prices and weak currencies.

When it entered Kenya in 2010, Airtel launched a vicious price war in the telecoms industry, slashing calling rates by more than half to Sh3 per minute across all networks. The price war did not play in its favour.

Already, stiff competition has seen the exit of India's yuMobile and Orange. Safaricom and Airtel Kenya bought their smaller rival yuMobile (owned by Essar) at a cost of around $120 million (Sh12.3 billion at current exchange rates). The deal saw Essar Group sell its Kenyan base stations and transmission infrastructure to Safaricom, and its customer base to Airtel Kenya.

Orange, which holds a 70 per cent in Telkom Kenya, announced through a statement in November last year that it was exiting the Kenyan telecoms market for failing to turn a profit in the seven years it has been in the market. It has sold its stake to Africa-focused equity fund Helios.

This means of the three mobile phone operators, only Safaricom is reporting profits as others bleed. The telco announced a 23 per cent increase in profits to Sh18 billion for the six months to September, and projects to make between Sh35.5 billion and Sh36.5 billion in its full year.