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Tuesday, June 5, 2018

FOREIGN COMPANIES NEED TO SPREAD THE PROFIT

Telecom companies have had a torrid time lately, having to take criticism for events that many times were not of their making but for which they became convenient targets.

In the latest incident MTN bore the brunt of the public anger following a reported decision by its service provider Chinese firm, Huawei, to outsource some of its services to India. The net import of this decision it was said would mean job losses in Uganda. While the soon to be affected engineers are not employees of MTN it was convenient to attack the South African based company.

We then found out that Airtel’s partner Nokia had carried out a similar manoeuvre transferring jobs to India and costing 29 engineers locally their jobs.

There may be some disagreement but outsourcing functions is a long established way of creating efficiencies with in companies. So for instance in the case of the telecommunications companies their core function is to market service not to maintain equipment. So you outsource that function to a company’s core function is operating and maintaining equipment.

"The logic is that in focusing on what you do best you can cut out a lot of wastage that would come from the distraction of learning and trying to do other things...

However outsourcing can take another form. That while I am an expert at what I do, there may be others of comparable skill who can do it more efficiently, often less expensively. This last bit is probably what the telecom service providers did. By consolidating all their operations from various countries to India they can get out more for less input.

No sooner have they got over this they may come under attack for increased fees on mobile money transactions or data fees or dropped calls or suspension of SIM card registration or any number of things that may or may not be their fault.

"It is obvious that why the criticism of these companies can be very vehement and virulent is because they are “foreign” companies. They may argue that they are incorporated locally, they employ a lot of Ugandans, they own buildings, they support local business ecosystems and on and on. But it is a truth of public relations that when perception comes up against fact, perception wins all the time....

So the trick for these telecom companies and any other “foreign” company for that matter is to shift the perception that they are not local companies.

How to do that?

Last month Ghana’s MTN unit launched he sale of shares there. The company is looking to float 35 percent of MTN Ghana on the stock exchange there in a few weeks, which was a condition of the renewal of their license. Nigeria MTN is soon following suit.

With that single swoop perception will be changed about these companies as a critical mass of people will now feel real stakeholders in the company.

We have seen it happen locally. By Stanbic Bank listing shares on the exchange it took the sting out of losing the tainted silver of Uganda Commercial Bank (UCB) Stanbic. The same can be said for power distributor Umeme, who prior to their listing on the exchange was coming under attack for issues in the electricity sector, which were often times not their fault.

It seems a simple solution but the truth be told foreign companies have no need for locally sourced funds or for inviting partners into the business, which are the traditional business reasons for floating shares to the public.

They also do not want to attract more shareholders, which would invariably lead to too much scrutiny of the business, often not in favour of their home offices. But they would not say that in public.

What I am suggesting is a PR exercise, but they argue that it is too costly a price to pay for public relations. And they fear too by leaving the value of the company to rise and fall with local market perception is too risky. What they are really saying is that it is easy to go on with business as usual, with minimal interaction with the public, than open ourselves up and put in the extra work to manage that process.

"But in an increasingly connected world bad press in the remotest part of the network can affect a company’s fortunes on the London or New York Stock exchanges, maybe even more so, because as they say the lies will be half way around the world while the truth is still lacing up...

But if they were to look beyond their grasping fingers, allowing more locals to share in those same fortunes will allow them a critical mass of if not blind supporters, at least the benefit of doubt when the rabble rousers come calling. As they invariably do.


It’s true foreign companies don’t need our money. But there is something to say about being good corporate citizens that goes beyond painting zebra crossings, kissing orphaned babies and digging pit latrines in rural schools.

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