AT&T headcount drops by 30,760 with WarnerMedia spinoff

The final season of Game of Thrones, it is fair to say, was something of a botched job.

Previously the empathetic and righteous claimant to the Westeros crown, Daenerys Targaryen (spoiler alert) improbably turned psychopathic, slaughtering thousands from atop her fire-breathing dragon, in the space of an episode.

Battle scenes were too badly lit to make out. A Starbucks coffee cup showed up in one take.

Figure 1: From a staffing perspective, the US operator is now 38% smaller than it was just five years ago, and it's probably not done yet.
(Source: AT&T)

By then, the show's creators at Time Warner were under the control of AT&T, whose short-lived ownership was equally messy. For staff, it must also have been as disorientating and scary as an imagined ride on dragonback.

According to an old filing with the Securities and Exchange Commission (SEC), some 26,000 people worked for Time Warner at the end of 2017, months before the takeover went through.

Just four years later, staff at the rebranded WarnerMedia were flipped into a new joint venture with Discovery, named Warner Bros Discovery, leaving AT&T to focus on connectivity and observers to ruminate on another failed media experiment.

As a fait accompli, the divestiture received little attention when AT&T reported its second-quarter figures this week. But the full impact on company headcount was shown for the first time.

In the context of layoffs and other downsizing, it merits some commentary, not least because no other telco in the Western world has shed staff in such vast quantities over the last few years.

Figure 3: AT&T's headcount (Source: AT&T)

The difference attributed to the spinoff in itself is interesting. When AT&T reported numbers for the first quarter, it laid claim to 203,160 employees. The second-quarter update points to 172,400 for a drop of 30,760.

In other words, AT&T has just lost several thousand more staff than the number it gained at the time of the takeover.

Whether all the WarnerMedia employees retain their jobs at Warner Bros Discovery remains to be seen, but it will be worth keeping an eye on the venture, with Discovery employing 11,000 people, according to an SEC filing, at the end of last year.

If the Time Warner figures are included, AT&T employed as many as 280,000 people in late 2017, meaning the workforce has shrunk since then by as many as 107,600 roles.

It is a huge amount, equal to 38% of the headcount in 2017 and enough to staff the whole of BT, the UK telecom incumbent.

Stankey kicking up a stink

Although other divestment activity explains a good chunk of the reduction, AT&T has also taken advantage of automation and a consumer preference for shopping online to cut thousands of other positions.

By October last year, for instance, the company had realized about $500 million in savings from what John Stankey, its CEO, described as "the rationalization of our retail store footprint."

Another $1 billion had been saved in field operations. Clever software can now alert telcos to potential equipment problems so that technicians do not have to make routine visits.

AT&T has also been asking customers to install equipment instead of relying on technicians to do it – an easier sell with a virus in circulation.

Figure 2: AT&T's five-year share price ($) (Source: Google Finance)

The mission is to cut annual operating expenses by $6 billion, and Stankey believes AT&T will be two thirds of the way there by the end of this year.

The worry for remaining employees is what all this could mean for their livelihoods. When he spoke with analysts about the company's first-quarter performance earlier in the year, Stankey suggested that further automation could be an answer to wage demands prompted by rising inflation.

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

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

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Recent developments will not buoy staff spirits. The CEOs of both Ericsson and Nokia are pitching their latest wares as productivity boosters for telcos, justifying price rises by arguing that customers will save money in other areas.

That could feasibly be in energy or property, of course, but it raises the possibility of new technologies allowing operators to function with a leaner workforce.

Stankey also sounds more willing to increase spending with suppliers than on staff.

"We want our suppliers to be healthy. We pay attention to that. We have good, long-standing partnerships with our suppliers. And I will be candid. We have sat down with them. In some cases, even though I've not had to pay people more, I've elected to pay people more because I think that makes for a healthier win-win relationship on things moving forward," he said on this week's earnings call.

The efficiency drive has lifted revenues per employee from $573,214 in 2017 to $833,485 last year, although a revision of sales to account for the Time Warner spinoff lowers the 2021 number to $777,483.

Meanwhile, AT&T remains heavily indebted, despite the recent divestiture, with $129.7 billion in long-term debt.

Interest rates are going in only one direction, and AT&T has slashed cash-flow forecasts because customers are taking longer to pay their bills. Its share price fell 7.6% yesterday after it reported results. Expect the shrinkage of one of America's biggest telecom firms to continue.

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— Iain Morris, International Editor, Light Reading