Redundancy and responsibility

Redundancy and responsibility

Kipp is a little disappointed as profitable Etisalat prepares to sack 300 employees at the same time as pursuing a $12billion Zain deal.

December 20, 2010 5:39 by Eva Fernandes

This week news emerges that Eitsalat will be laying off 300 of its staff. The move represents a three percent cut of Etisalat’s 10,460 strong UAE staff, and will be “focused on productivity, performance, age and redundancy factors” according to statements.

Faiez Awadh, the senior vice president of human resources at Etisalat told the National “Etisalat has embarked on a limited employee retrenchment programme, which has impacted less than 3 percent of staff.” Ah retrenchment, that’s OK then.

While the teleco, which enjoyed a monopoly in the Emirates until a few years ago, will be cutting back on staff in the UAE (mainly in the engineering and sales division, apparently) it continues to hire staff for their international operations in 16 countries—no doubt to support its aggressive overseas expansion drive.

Because the cut backs will surely help Etisalat score brownie points with creditors as it attempts to secure a 46 percent stake in Zain for $12 billion (the deal is yet to be approved by Zain’s shareholders). Should Etisalat be successful in their attempt, they would have a controlling stake in the company as it would represent 51 percent of Zain’s total issued share capital and voting rights.

Etisalat has been spearheading an expansion drive this year, which is a natural response to its lost monopoly at home rival Du’s domestic expansion. There is no doubt that 2010 has been a relatively challenging year for the company, as Du steals market share. As it most recently observed in an annual report, “competition is bad for business.” The third quarter of 2010 saw Etisalat add only 10,000 new customers to its mobile business, a paltry number in comparison to the 159,800 new customers Du added in the same time. Business simply isn’t as good as it once was at home.

But that’s not to say it has been bad. Although Etisalat recorded a significant drop in profits for Q3 of this year compared to Q3 2009 (a drop of 23 percent), it still reported a net income of Dh1.74 billion. In 2009, the company’s net profits were Dh8.8 billion. The fact is, this is a company still ticking along just fine. So while the economic slowdown and the introduction of one competitor may very well be cited as reasons behind the firings, what can Kipp say other than we don’t like it when profitable companies announce mass layoffs. We are especially disappointed when such actions come from a local company that was born, based and grew up in the Emirates, and as such might be expected to feel more responsibility toward the community.

The staff reduction smacks of efforts to satisfy shareholders and markets rather than company needs. And, given that consumers in the UAE only have a choice of two telcos, how will a staff reduction help ensure the levels of service that will protect Etisalat from Du? Kipp hopes this doesn’t prove a shortsighted move, but fears it is.