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AT&T preparing to unveil massive, three-year cost-cutting plan

AT&T's leadership is putting the finishing touches on a multibillion-dollar cost-cutting plan that covers ten different areas of its business and will stretch into 2023.

"The management team is now putting the detailed plans around it, governance structures in place in each of those plans, around the ten major initiatives," AT&T COO John Stankey said Tuesday at the Morgan Stanley Technology, Media & Telecom Conference in San Francisco. He did not provide the full details of the plan, nor did he specify what the ten initiatives would cover, but he promised AT&T would provide additional details on the program during its next quarterly earnings report.

AT&T CEO Randall Stephenson first disclosed in October 2019 the operator's plan to cut costs. He said AT&T hired former Clearwire and Vodafone executive Bill Morrow as its new "special adviser and managing director of process service and cost optimization," reporting to Stankey, Stephenson and AT&T's corporate development and finance committees.

And Stankey – the executive in line to take over leadership from Randall Stephenson – said late last year that the cost-cutting effort would cover everything from shrinking AT&T's workforce to a "rationalization" of the operator's wireline footprint.

In his comments today, Stankey offered a few more details about exactly how big the cost-cutting effort would be, what it might include and how long it will last.

"The management team, with Bill's [Morrow] leadership, has looked at effectively ten broad initiatives that we believe can generate double digits of billions [in savings] over a three-year planning cycle," Stankey said, noting the effort is designed to help AT&T reach its profit margin goals.

Stankey said the cost-cutting program will be broken down into three main sections: short-term initiatives in the next 12 months, mid-term efforts in the next 12 to 24 months and long-term endeavors that will stretch across the next 24 to 36 months.

In discussing AT&T's short term efforts, Stankey said the operator would continue working on the "headcount rationalization" and "benefit restructuring" it has already started on, and that AT&T has "some additional work we can do in that area."

"We have some short-term opportunities in how we deal with third-party costs, supplier costs, we'll be pushing on," he added. "We have some near-term opportunities in our call center structure that we're working on."

In the next 24 months, Stankey said AT&T would begin to target other areas. "What we're doing around our IT rationalization and our architecture rationalization, turning down applications, movements to the cloud, getting cost efficiencies in our very, very broad infrastructure, some of that facilitated by portfolio rationalization. You might see that," he said, without providing specifics. "We have some opportunities on energy management. We're a big buyer of electricity every year to run our infrastructure. We have some things we can do in taking advantage of different serving architectures and incentives that are out there to lower some of our energy costs. That will take a little bit of time to implement, but we believe it will give us some runway."

He added that AT&T would also do "some work around billing and credit collections rationalization," but again didn't elaborate.

AT&T isn't the only major telco looking to reduce costs. Verizon announced a $10 billion, four-year cost-cutting plan in 2017, and in 2018 the operator said it would offer 44,000 of its management employees a buyout deal under that program.

At the same investor event, Verizon CFO Matt Ellis today said the operator is now halfway through its cost-cutting effort. He said this year Verizon would begin working on cutting costs on its equipment sourcing and supply chain management operations, as well as in its business segment. He didn't provide any further details.

Importantly, both AT&T and Verizon have already significantly reduced their respective workforces. Job cuts at both operators soared to their highest level in at least seven years in 2019, when the two companies reduced their combined workforce by nearly 30,000 roles, or more than 7% of the total in 2018.

Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

adam619 3/4/2020 | 7:32:32 AM
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