Sweden's Tele2 slashed hundreds of jobs last year, according to annual figures published today, and employees can expect more cuts in the next three years after it recently announced plans for a huge savings program designed to please shareholders.
The company's annual report for 2019 shows that exactly 681 jobs were removed last year in continuing operations, about 13% of the operator's total headcount at the end of 2018.
The cuts helped to boost profitability while sales remained flat on a pro forma basis, the figures show: Earnings before interest, tax, depreciation and amortization – a key measure of telco profitability – rose nearly 7%, to about 9.3 billion Swedish kronor (US$930 million), on sales of roughly SEK27.7 billion ($2.8 billion).
Tele2, whose main business activities are in Sweden and the Baltics, is not the only European operator that is reducing headcount with an eye on the bottom line: Data compiled by Light Reading shows the workforce across seven telecom incumbents in Western Europe shrank by 18,500 jobs last year, about 3% of the total.
The scale of the reduction is much greater at Tele2 and the operator last month said its aim was to cut annual costs by another SEK1 billion ($100 million) by 2022. CEO Anders Nilsson said this would mean "we will have reduced cost by at least SEK1.8 billion ($180 million) between 2018 and 2022."
Savings would come, he explained, from removing legacy IT systems and eliminating "silos" and "double functions."
The general plan is to reduce operating costs but maintain or increase capital expenditure. This, Tele2 has previously indicated, should result in "significant cash flow generation, and we intend to distribute that to shareholders."
The annual report published today includes no specific commentary on headcount reductions but instead insists that running a more efficient organization will bring benefits for customers.
"While this transformation will result in a significant reduction in opex, that is not the goal in itself," said Tele2 about its SEK1 billion savings target. "We aim to operate smarter and reduce complexity which in the end means serving the customer in the best possible way while operating an efficient and fast organization."
A breakdown of employee numbers shows that Tele2's workforce shrank mainly in Sweden, with headcount rising in the markets of Lithuania and, to a lesser extent, Estonia.
The Swedish operation finished 2019 with 3,038 employees, down 648 on the figure at the end of 2019, while Tele2's Latvian business also shrank significantly: After losing more than 14% of workforce in 2019, it had exactly 623 employees on its books in December.
Tele2's overall figures have been restated since the publication of its 2018 annual report, when it said there were 5,184 employees in continuing operations at the end of December. That figure was up from 4,398 a year earlier, boosted by Tele2's acquisition of cable operator Com Hem, which added 897 employees.
According to the latest, restated figures, there were 5,376 employees in continuing operations at the end of 2018 and this number had fallen to 4,695 by December 2019.
The reductions have led to a major improvement in revenues per employee, a metric now attracting investor attention as a sign of telco efficiency.
Including Com Hem, and using end-of-year employee statistics, Tele2 generated about SEK5.2 million ($520,000) for each member of staff in 2018. Last year, it made nearly SEK5.9 million ($590,000).
While Tele2 has provided few details about its efficiency program, service providers worldwide are taking advantage of technology developments – plus a growing consumer appetite for online sales and communications – to run more streamlined and automated operations.
On the customer-facing side of the business, many companies have been closing down their physical stores and making investments in artificially intelligent "chatbots" that can answer the queries traditionally handled by a customer care assistant.
Automation has also been responsible for job losses on the network and IT operations side. Several months ago, the UK's Vodafone revealed that new technologies had already claimed hundreds of roles within its network operations centers.
- Tele2 targets further cuts as sales remain flat
- Europe's telco incumbents slashed 18.5K jobs in 2019
- AT&T and Verizon axed nearly 30K jobs last year
- Vodafone UK is emptying its NOCs
- Telenor takes step closer to zero-humans business
— Iain Morris, International Editor, Light Reading