Etisalat to cut at least 300 jobs to save money

Observers say move is a positive sign for the company, with focus on productivity as telecoms operator look's to reduce its Dh4bn staff bill amid greater domestic competition.

Etisalat is to cut at least 300 jobs in the UAE as it looks to reduce its Dh4 billion (US$1.08bn) staff bill amid greater competition in the domestic market.

The telecommunications operator says about 3 per cent of its 10,460 UAE employees will lose their jobs, in what will be Etisalat's first major staff reduction in years of growth.

Faiez Awadh, the senior vice president of human resources at Etisalat, said: "Etisalat has embarked on a limited employee retrenchment programme, which has impacted less than 3 per cent of staff."

Staff numbers at the operator have been growing steadily in recent years. A total of 10,460 were employed in the UAE last year compared with 8,861 in 2007. Etisalat's UAE workforce accounts for about two thirds of its total employee count of 16,680, according to recent financial filings.

Total staff costs, including pensions and end-of-service benefits, stood at Dh3.12 billion for the first nine months of this year, a 4.9 per cent increase on the same period last year.

Mr Awadh said the retrenchment of staff at Etisalat would be "focused on productivity, performance, age and redundancy factors".

"Naturally, within a corporation which has been in existence for more three decades, we can expect an element of natural reorganisation to occur," he said.

The company declined to specify the savings it would make through the redundancy programme.

Commentators said the cut to Etisalat's staff base was deep. "The number is high," said Panos Manolopoulos, the managing partner for the Middle East at the recruitment consultancy Stanton Chase International.

"But, at the same time, it's not the first time it's happened for other companies. We've seen it before and we'll see it again in the future."

Etisalat has hired McKinsey, a consulting firm, to help determine the total number of staff it will make redundant although some layoffs have already occurred, sources at the operator said.

The majority of staff facing redundancy are in Etisalat's engineering and sales divisions, although it is expected that layoffs will affect the whole company, according to a senior Etisalat executive, who spoke on condition of anonymity.

The company has engaged in an aggressive overseas expansion, amid greater competition in its domestic market.

Etisalat will continue to hire staff in its international operations in 16 countries as it shifts it focus to becoming a global operator, sources at the company said.

Its foreign expansion may be increased further if the deal to buy a 46 per cent stake in Zain for $12bn is approved by the Kuwaiti operator's shareholders later this year.

The acquisition would represent 51 per cent of Zain's total issued share capital and voting rights, and thus represent a controlling stake in the company.

But according to a report by CNBC Arabiya, Etisalat has agreed to buy 40 per cent of Zain, and not 46 per cent as initially announced. Etisalat executives declined to confirm or deny the report.

Analysts point to Etisalat's shrinking revenues in the domestic market, which have been under pressure since the operator lost its mobile monopoly in the UAE in 2007 with the arrival of du's service as well as the slowdown in the UAE economy.

"The landscape has changed. [The UAE telecoms market] has become very competitive," said Simon Simonian, a telecoms analyst with Shuaa Securities.

Etisalat's share of the domestic mobile market has levelled off at about 63 per cent and it added only 10,000 mobile customers in the third quarter of this year.

By comparison, du added 159,800 new customers to its mobile business in the last quarter and now has about 37 per cent of the market.

"As we've seen in the past few quarters, revenues in the UAE has seen a lot of pressure," Mr Simonian said. "It might be unfortunate from the employees' perspective but the top line is under pressure and the company has no choice but to examine a reduction of its workforce."

A telecoms industry analyst who declined to be named said investors should look at Etisalat's planned redundancy programme as a positive sign that the operator was making steps into becoming a leaner, more efficient company.

"From the perspective of UAE stockholders, this is a good thing," the analyst said.