Telkom Kenya freezes hiring to check wage bill

 

Telkom CEO Mickael Ghossein. Photo/Diana Ngila 

By OKUTTAH MARK

In Summary

• Chief executive Mickael Ghossein says only departing staff will be replaced on a case-by-case basis, as the loss-making firm targets to cut its current payroll which gobbles up 22 per cent of its revenue.
• Telkom Kenya currently has slightly above 1,700 employees, who cost the company more than Sh1.2 billion annually, according to the management.

Telkom Kenya has frozen hiring of new staff to cut on the wage bill for the struggling telecommunications company.

Chief executive Mickael Ghossein says only departing staff will be replaced on a case-by-case basis, as the loss-making firm targets to cut its current payroll which gobbles up 22 per cent of its revenue.

Telkom Kenya currently has slightly above 1,700 employees, who cost the company more than Sh1.2 billion annually, according to the management.

“We have frozen our recruitment for new employees as our head count does not match our revenue,” Mr Ghossein said. 

A former State corporation, Telkom Kenya has retrenched about 15,900  in seven years since France Telecom bought shares in the firm in an effort to restructure and bring it back to profitability.

Market leader Safaricom which earned revenue of Sh124.2 billion in the year ended March 2013 has 3,254 employees.

Mr Ghossein said the current employee salaries ratio of 22 per cent of its total revenue is seven percentage points higher than the ideal cost of the employees in the market.

Telkom Kenya’s move to freeze hiring goes against the grain of an industry trend that shows a resumption of hiring nearly after three years of a prices war sparked by Airtel in August 2010 that cut airtime charges by half and eroded investor confidence.

READ: Telcos resume hiring with end of voice price war

The price war saw the operators cut their staff count from 5,869 in 2010 to 5,542 workers last year as they turned to outsourcing in order to lower their wage bill.

Latest Communication Commission of Kenya (CCK’s) annual report for 2012/2013 shows that the mobile operators increased their staff count for the first time in three years.

The operators had 5,617 workers in June compared to 5,548 in the same period in 2012 — a signal of confidence in the market outlook in a year that saw Airtel and Essar join Safaricom in raising call tariffs to boost their sales.

Telkom Kenya in the same year decided to go against the grain by not increasing its tariffs, an effort that has had little impact on its business and which has meant it relies on its two shareholders (France Telecoms 70 per cent and Government of Kenya 30 per) for capital injection.

The management is blaming the price war, which saw tariffs in the mobile telephony market drop by half in 2010, vandalism of its cables and high frequency spectrum fees for its declining performance.

Latest industry statistics from CCK indicates that Orange has the lowest number of subscribers at 2.2 million, compared to Safaricom’s 20.8 million. Airtel and Yu have 5.5 million and 2.7 million customers respectively.