Telenor is like one of those before and after photo compilations of extreme dieters – people who have lost half their body weight in several months by eating leaves and avoiding fun.

In its before shot, taken in 2015, the Norwegian telco sprawled across Europe and Asia with about 38,000 employees. The after image of last year shows a company that has shrunk back to its European core, employing as few as 16,000 people.

It is arguably in fitter shape than ever before. Although headcount has plummeted 58%, annual revenues have fallen just 14% over this period. Profitability, as measured by EBITDA (earnings before interest, tax, depreciation and amortization), has soared.

Telenor's EBITDA margin is up from 34.5% in 2015 to 44.6% last year. Using today's exchange rates, its sales-per-employee metric has risen from about $356,000 to more than $727,000 between these years.

Figure 1: Headcount and revenues per employee ($) at 'big 20' (Source: Companies, SEC filings. Notes: All currency conversions are at exchange rates published this week; operators include América Móvil, AT&T, BCE, BT, CenturyLink, Deutsche Telekom, KPN, Millicom, Orange, Proximus, Rogers Communications, Swisscom, Telecom Italia, Telefónica, Telenor, Telia, Telus, VEON, Verizon, Vodafone)

Selling workforce-heavy businesses in low-income markets like India and Myanmar has been a healthy move, of course. But few other operators have shown quite as much zeal for automation.

Quizzed about the workforce impact in 2020, CEO Sigve Brekke told analysts that infrastructure modernization and other "digital" changes would produce "small organizations" in the sector. "Touch-free" was Telenor's preferred euphemism at the time for this vision of networks that effectively run without human interference.

If Telenor stands out as a pioneer, many of its European and North American peers have also caught the automation bug. Net job cuts at 20 Tier 1 operators regularly tracked by Light Reading hit a five-year high of nearly 62,000 in 2021, about 4% of the total.

Since 2015, those same companies have slashed their collective headcount by nearly 292,000 employees, or roughly 16%. Mergers, acquisitions and divestments do account for many thousands of these cuts. But other jobs have fallen victim to upheavals in technology.

Automation for the people

How low could headcount go? Japan's Rakuten is a possible guide. Its newly constructed mobile network in Japan is probably the most automated on the planet.

Although Rakuten Mobile does not divulge overall staff numbers, its technology department employs a total of 1,100 people, and only 250 of them "really touch the network," according to CEO Tareq Amin. A traditional operator would have thousands in this operations unit, he said.

Including all its ecommerce activities, overall headcount at Rakuten Group has risen from 17,214 in 2018, the year before it announced its telecom move, to 23,841 in 2020 (it has yet to publish an annual report for 2021).

This compares with the 47,320 that telecom rival KDDI had on its books at the end of its last fiscal year, and the 47,313 at SoftBank Corp (the telecom part of SoftBank).

Meanwhile, the UK's BT, a fixed and mobile operator with few assets outside its domestic market, employed as many as 98,370 people at the end of March.

Apologists for automation insist humans will be incapable of operating advanced 5G networks that include hundreds of parameters and need configurations to be changed by the millisecond.

Ignoring the casualties so far, a long-running argument is that automation – rather than destroying jobs – will free up staff for other, less brain-numbing activities.

But it is hard to see where they would be needed apart from in software, and a telco that maintains headcount at historical levels while creating more software jobs is a company with higher costs.

That much seems evident from a quick glance at wage figures compiled by the US Bureau of Labor Statistics. Telecom technicians and repairers earn mean annual salaries of up to $62,250, according to that data, while software developers make more than $120,000.

A pivot to software unaccompanied by job cuts elsewhere has troubling implications given how much big operators already spend on staff. At Germany's Deutsche Telekom, for instance, about 27% of total operating costs last year went on labor.

Inflationary pressure combined with slow or zero sales growth could speed up the pace of automation this year and next. Grumbling about wage demands on AT&T's last earnings call, CEO John Stankey reckoned automation would mitigate the effect.

"The good news is we're doing a lot of investment in other forms of mechanization and automation in our business," he told analysts.

"And some of that investment is helping us keep a lid on some of the wage-related inflation costs."

AT&T cut 28,160 jobs last year, more than any other operator in Light Reading's study, and its headcount has dropped by 78,850 since 2015, leaving it with about 202,600 employees at the end of 2021.

Like Telenor, it has witnessed a dramatic improvement in revenues per employee over this period, up from about $522,000 in 2015 to more than $833,000 last year.

Mind the gap

Yet automation is not a straightforward task for many operators.

"We're not at the stage where we can replace human beings in NOCs [network operations centers] with bots, and I doubt that's our target," said Abdu Mudesir, Deutsche Telekom's chief technology officer, during a conversation with Light Reading at this year's Mobile World Congress. Automation throughout the organization "needs to be wider," he said.

The difficulties for operators like Deutsche Telekom include the need to continue operating older, hard-to-automate technologies and platforms, such as copper, 2G and 3G networks. The decommissioning of those should deliver savings in the next few years.

In the meantime, European operators have attempted to cut costs by sharing infrastructure with rivals. Some, including Deutsche Telekom, have also started buying IT services from public-cloud providers, effectively outsourcing their basic IT estate.

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

If software expertise is paramount, then skills and culture gaps are perhaps the main challenges faced by operators determined to automate.

Not every employee can be retrained to be a software engineer and competition for emerging talent is fierce.

"The top companies to work for wouldn't include a telco," said Darrell Jordan-Smith, the senior vice president of global industries for Red Hat, an IBM software subsidiary, at a recent press event.

"It would be a Google, an Amazon, a Microsoft."

Mirko Voltolini, the vice president of innovation for Colt Technology Services, recognizes that dilemma.

"There is a massive skills gap today and a lack of availability of skills in the market because everybody is after the same skill sets," he said.

BT sounds increasingly desperate. According to a new study it commissioned, higher-education students in the UK are mainly oblivious to opportunities in artificial intelligence, with courses "unnoticed" by nearly three in five of them. Unless that changes, the zero-touch network could be some way off.

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— Iain Morris, International Editor, Light Reading