Big telcos have cut headcount by 9% since 2015

Headcount at the world's largest telecom operators outside Asia shrank by more than 48,000 roles in the last fiscal year as major firms used automation, outsourcing and other cost-cutting measures to reduce the size of the workforce, according to the latest figures compiled by Light Reading.

The cuts represent about 3% of the total workforce across 20 of the world's largest telecom operators by sales, regularly tracked by Light Reading. They happened mainly in advance of the coronavirus outbreak and there are now signs that some companies are making or planning even heavier reductions amid the pandemic.

AT&T this month confirmed there would be "targeted but sizeable reductions" across its workforce after Communications Workers of America (CWA), a trade union, said the US telecom giant was planning to cut 3,400 technical and administrative jobs and close 250 stores employing 1,300 people.

Its staff numbers have already fallen by around 35,500 since the end of 2017 and cost-cutting efforts have been "accelerated by the COVID-19 pandemic," said the operator.

Following its recent merger with Sprint, T-Mobile US last week said some employees would be "supported in their efforts to find a new position outside the company" under what it calls "workforce evolution." While it has not disclosed numbers, CWA thinks about 30,000 of the operator's 80,000 jobs are under threat.

Redundancy plans are not confined to the US. Last month, the UK's BT said it would seek to reduce annual costs by £2 billion ($2.5 billion) by 2025, partly through automation. Vodafone, another UK-based firm, is targeting €1 billion ($1.1 billion) in annual cost savings at its European operations, with customer care and distribution in line for the heaviest chops.

Telecom Italia, which has cut nearly 11,000 jobs since 2015, is pursuing early retirement for another 2,000 workers under an efficiency program, it revealed in its most recent earnings report for the first quarter of 2020.

The plans follow tens of thousands of job cuts in the last few years at the 20 operators in Light Reading's database, a relatively small number of which are the result of sales and divestments. Between 2015 and 2019, the net reduction in headcount at those firms equals about 175,000, more than 9% of employee numbers.

Table 1: Headcount at major service providers

2015 2016 2017 2018 2019
América Móvil 195,475 194,193 191,851 189,448 191,523
AT&T 281,450 268,540 280,000 268,220 247,800
BCE 49,968 48,090 51,679 52,790 52,100
BT 102,500 106,416 105,787 106,742 105,344
CenturyLink 43,000 40,000 51,000 45,000 42,500
Deutsche Telekom 225,243 218,341 217,349 215,675 210,533
—T-Mobile US 50,000 50,000 51,000 52,000 53,000
KPN 14,078 13,530 13,275 12,431 11,248
Level 3 12,500 12,600 N/A N/A N/A
Millicom 15,956 17,985 19,127 21,403 22,375
Orange 156,191 155,202 151,556 150,711 146,768
Proximus 14,090 13,633 13,391 13,385 12,931
Rogers 26,200 25,200 24,500 26,100 25,300
Sprint 30,000 28,000 30,000 28,500 c. 27,000
Swisscom 21,637 21,127 20,506 19,845 19,317
Telecom Italia 65,867 61,229 59,429 57,901 55,198
Telefónica 137,506 127,323 122,718 121,853 117,347
Telenor 38,000 37,000 30,800 20,832 20,044
Telia 26,895 26,017 25,021 20,836 21,232
Telus 47,700 51,300 53,600 58,000 65,600
VEON 52,321 41,994 39,938 46,132 46,492
Verizon 177,700 160,900 155,400 144,500 135,000
Vodafone 111,684 111,556 106,135 98,996 95,219
Source: Companies, SEC filings.
Notes: End-of-year figures were used unless unavailable, in which case year-average numbers were used; Level 3 was acquired by CenturyLink in 2017.

None of the major US or European operators has grown its workforce over that period and the net reductions have been huge at a few big firms besides AT&T. Since 2015, local competitor Verizon has cut headcount by 42,700 roles, nearly a quarter of the total. Deutsche Telekom, Europe's largest operator by sales and the owner of T-Mobile US, has slashed nearly 20,000 jobs over the same period, roughly 9% of the full amount.

Shrinkage at European operators is partly explained by asset sales as companies have retrenched to focus on core markets. The "big six" European telcos – BT, Deutsche Telekom, Orange, Telefónica, Telecom Italia and Vodafone – collectively cut about 68,600 jobs between 2015 and 2019, nearly 9% of the total, as they pulled out of markets in the Americas, Asia and Europe.

For staff, the main concern now is that coronavirus spurs their employers to automate and "digitalize" the business at an even faster pace as they try to safeguard profitability.

A change in consumer habits risks many thousands of layoffs in retail operations as customers decide to avoid stores and buy online.

Lockdowns and restrictions on people movement during the pandemic may also accelerate investment in "chatbots," artificially intelligent voice and messaging systems that can handle many of the customer queries usually answered by a customer service assistant.

Already used by operators including Vodafone, chatbots would allow companies to reduce headcount and close customer service facilities to cut expenses, although some firms have successfully adapted to a "working from home" model for this part of the business.

Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.

In the meantime, the arrival of what the industry calls "zero touch" networks has triggered job losses on the technical and operations side of the telco business. More sophisticated 5G networks and software systems, combined with greater reliance on cloud providers for IT, will lead to further cuts in the next few years, according to operators and equipment vendors.

Coronavirus could spur more operators to work on fully automating their network operations centers (NOCs) as they try to minimize reliance on facilities where infections could easily spread between employees.

That shift to a no-person NOC was underway at Vodafone even before the outbreak. "We have been focusing heavily on moving to zero-touch NOCs, which means automating what we have in the NOCs," said Scott Petty, the chief technology officer of Vodafone UK, during a press briefing in late 2019.

Vodafone has already cut staff numbers in the NOCs from about 1,500 to the "low-single-digit hundreds," he revealed. "Five to seven years from now, there will be a very small number of people that run the NOC infrastructure."

Rakuten, an e-commerce giant building a new mobile network in Japan, is using technologies that can be maintained with a fraction of the workforce its competitors currently require, according to Tareq Amin, the chief technology officer of the Rakuten Mobile subsidiary.

His business has no field operations staff or traditional back-office functions whatsoever, he told Light Reading in March. Its entire operations team comprises about 175 employees and Amin does not expect this number to exceed 350 in future. Each of Japan's other service providers employs thousands of people in this area, he said.

Three, the smallest of the UK's four mobile network operators, last year outlined plans to cut between 700 and 800 technology and operations jobs – about two thirds of the total and 15% of its overall headcount – as it transfers responsibility for its IT systems to Microsoft.

The software giant's expansion into the telecom sector could have repercussions for networks staff within service providers. In recent weeks, Microsoft has acquired Metaswitch and Affirmed Networks, both of which have developed network software that can run in the cloud.

Productivity boost
Staff cuts are happening as pandemic-era lockdowns threaten sales of some telco services. Although the sector looks far more resilient than other parts of the economy, several operators have warned of a hit to roaming and advertising revenues, as well as sales of TV services linked to canceled sports events.

Another risk is that struggling consumers downgrade to lower-cost service plans and ditch expensive add-ons or "luxury" features.

European operators have responded in various ways as they try to protect margins and free up cash for investment in critical infrastructure. BT, Orange and Sweden's Telia are three firms that have cut dividend payments this year, while Vodafone and Telecom Italia are spinning off their tower assets and sharing networks in a bid to reduce costs and raise capital.

Layoffs are a more obvious solution for operators determined to retain control of key assets and avoid upsetting shareholders, especially as new technologies make it easier to reduce manual intervention.

The impact of staff cuts on productivity is already apparent in per-employee revenues, which have soared at companies hacking into the workforce.

Table 2: Revenues per employee ($)

2015 2016 2017 2018 2019
AT&T 521,585 609,965 573,214 636,791 731,207
BT 229,537 280,435 277,420 272,143 268,290
Deutsche Telekom 343,829 374,689 385,667 392,812 427,921
Orange 288,044 294,927 303,499 307,287 322,077
Telecom Italia 334,724 347,284 372,868 366,085 364,487
Telefónica 446,827 457,072 474,224 447,217 461,596
Verizon 740,574 783,095 811,030 905,882 976,800
Vodafone 499,030 477,532 491,378 493,644 528,599
Source: Companies, SEC filings.
Notes: All currency conversions are at exchange rates published this week; calculations used end-year employee numbers, as shown in the previous table, unless these were unavailable, in which case year-average numbers were used.

AT&T made $521,585 per employee in 2015, but the figure jumped to $731,207 last year after thousands of redundancies. At Verizon, the number rose from $740,574 to $976,800 over the same period.

Some of Europe's big players have also witnessed an increase, albeit one that is less dramatic. Deutsche Telekom's per-employee revenues grew from $343,829 in 2015 (using today's exchange rate) to $427,921 last year. At Orange, active in many low-cost African markets, the number rose from $288,044 to $322,077 over this period.

Operators are naturally wary of any cuts that could affect company sales and consumer loyalty, which has made technical and administrative functions look more vulnerable than customer-facing roles.

But that could change with the pandemic if online shopping turns out to be the "new normal" for millions of smartphone customers.

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— Iain Morris, International Editor, Light Reading

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