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Streamlining Cell
C
ADSL
South Africa (Broadband South Africa), 27 March
2007
It’s clear that Cell C’s new Chief
Executive, Jeffrey Hedberg, is keeping to his stated
objectives of streamlining Cell C. Cell C has reportedly
fired almost ‘3% of its 2 500 strong workforce in the
last 6 months’ (Ignoring talk of turmoil, Mwanza,
Finweek, 23 March 2007).
Why is it necessary to dismiss
people?
Although sad, dismissing people
forms part of most streamlining processes, making it a
necessity in order to avert a crisis or to lift profits to
reasonable levels.
In some cases, the streamlining
process is designed to avert a full-blown crisis, where
thousands could possible lose their jobs or where the business
entity as a whole could collapse. The logic behind the idea is
that you sacrifice a few for the many.
In other words, rather take the
risk of losing a few people than having to close the doors for
good. It’s never nice but definitely a necessity in many
cases.
Doesn’t streamlining leave room for
abuse?
It does but its not a
given.
This is why it’s so important
that good managers run a company. Otherwise you can get to a
situation where for example, people are sacked for the sake of
making huge profits instead of averting a crisis or to make
room for reasonable profits.
In other words, although
streamlining can be abused, its in many instances rather a case
of addressing past abuses than creating new opportunities for
abuse.
Is further job cuts in the pipeline at Cell
C?
Yes. ‘Further job cuts at senior
management level are on the cards…’ (Ignoring talk of turmoil,
Mwanza, Finweek, 23 March 2007).
Will Cell C
survive?
ADSL South Africa is convinced
that Cell C will survive despite all the drawbacks.
On the up side Cell C
still got a lot going for the company:
-
Improved
earnings
– Cell C has improved its earnings in its
last reporting period with a notable ‘…22% increase
in revenue to R3bn…’ (Ignoring talk of turmoil,
Mwanza, Finweek, 23 March 2007). Although Cell C
has not make a real profit yet, as seen in recent
downgrades of its high yield bonds by rating
agencies Moody and S&P, it’s a step in the
right direction.
In other words,
although Cell C still needs to report its first
solid profit, the increase in its earnings is
definitely helping them to get
there.
-
Joint venture with Virgin
Mobile – ‘A joint venture (JV)
signed last year with the Richard Branson-owned
Virgin Mobile - Britain's largest mobile virtual
network operator - to prop up Cell C's subscriber
recruitment campaign, has yet to have a positive
effect’ (Ignoring talk of turmoil, Mwanza, Finweek,
23 March 2007).
Despite the fact that
Cell C still waiting to see a positive effect from
its joint venture with Virgin Mobile, we believe
that they will reap the benefits of such a move at
the end of the day. We can’t see how they can go
wrong with a solid partner such as Virgin
Mobile.
In other words, the
possibility of reaping benefits from the joint
venture with Virgin Mobile is still alive and
kicking. Rome wasn’t built in a
day.
-
Mobile number portability
(MNP) – ‘Ironically, mobile
number portability (MNP) - whose introduction Cell
C championed - has turned out to be its Achilles
heel. Irked by the cellular operator's inability to
offer them cutting-edge data services such as 3G
and HSDPA, a significant number of post-paid users,
who constitute 20% of the group's overall 2,7m
subscribers (as at August 2006) are said to have
ported out of Cell C and defected to competing
networks MTN and Vodacom’ (Ignoring talk of
turmoil, Mwanza, Finweek, 23 March
2007).
ADSL South Africa
tends to disagree with Mwanza’s take on things. We
rather support the view of Vanashree Pillay, Cell
C’s Communications Manager, who said: "The
contention that we lost a number of high-end users
because we couldn't offer them a broad range of
data services is not based on fact. Our research
has shown that only 10% of our subscribers use data
services and we have got Edge for our more
sophisticated data users. For us, voice and data
services remain the most widely used services among
our subscriber base; we don't see the need to
launch a 3G or HSDPA network. To date both Vodacom
and MTN have yet to justify their business case for
3G" (Ignoring talk of turmoil, Mwanza, Finweek, 23
March 2007).
Also according to
Pillay, ‘…statistics recently provided to Cell C by
the more credible central reference database shows
that of the 33 000 people who ported at end
February 2007, Cell C lost about 13% and gained
40%, giving it a net gain of 27%’ (Ignoring talk of
turmoil, Mwanza, Finweek, 23 March
2007).
Unlike some other
cellular operators, Cell C embraced MNP from the
start and didn’t place obstacles in the way of
people that wanted to defect to other service
providers. They left the door wide open and its
still wide open to anyone who decides to join or
defect. Cell C’s open embracement of MNP should
tell South Africans that Cell C believes in the
freedom of choice and in their company’s ability to
deliver, despite setbacks.
In other words, while
Cell C did lose customers because of MNP, it has
also won customers in the process, resulting in a
net
gain.
-
New blood – New blood in the form of
new Chief Executive, Jeffrey Hedberg, might just
give Cell C the boost it needs despite rumours
suggesting ‘….that the Saudi O'ger group is
considering divesting from the firm’ (Ignoring talk
of turmoil, Mwanza, Finweek, 23 March
2007).
Even if rumours are
true that Cell C’s parent company, the Saudi O’ger
group, is considering divesting from the firm
because Cell C enforced the departure of former
Chief Executive, Taalat Laham, we shall give Cell C
the benefit of the doubt. We believe in Jeffrey’s
ability to streamline the company, something that
will soon be clear to his critics, leaving enough
room for new investors to get on board if Saudi
O’ger decides to abandon ship.
In
other words, while it will be a hard pill to
swallow if the Saudi O’ger group decides to
disinvest, ADSL South Africa believes Jeffrey and
his team will be able to turn the ship away from
the
rocks.
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