Efficiency Drive by Major Telcos Has Claimed 74K Jobs Since 2015

Iain Morris
11/14/2017
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The 20 largest telcos with headquarters in Europe and North America slashed more than 63,000 jobs last year, and ten of them have cut nearly 21,000 roles in 2017, as companies automated operations and bolstered efficiency metrics.

The headcount reductions by the ten operators to have disclosed jobs data in 2017 represent more than 6% of their combined workforce in 2015, with cuts totaling almost 74,000 jobs at those companies since then. Between 2015 and 2016, the layoffs were accompanied by an increase of nearly 5% in the average figure for revenues per employee, which rose from about $448,000 to roughly $470,000 annually, using current exchange rates.

Headcount
Sources: Companies
Sources: Companies

In some cases, the cuts and efficiency improvements were dramatic. US telco giant AT&T Inc. (NYSE: T), for instance, cut 12,910 jobs last year and has so far this year slashed another 11,740 positions. In total, that equals about 8.8% of AT&T's workforce in 2015, when it acquired satellite company DirecTV.

AT&T has also witnessed one of the biggest leaps in revenues per employee, from about $522,000 in 2015 to $610,000 last year.

Revenues per Employee ($)
Source: Companies
Source: Companies

In other major findings:

  • Of the 20 operators that Light Reading examined, 16 cut jobs in 2016 and the same number increased their per-employee revenues that year.

  • AT&T and Verizon Communications Inc. (NYSE: VZ) have together slashed 42,250 jobs since 2015.

  • Europe's incumbents have also made hefty cuts: Deutsche Telekom AG (NYSE: DT), Orange (NYSE: FTE), Swisscom AG (NYSE: SCM), KPN Telecom NV (NYSE: KPN), Telecom Italia (TIM) and Telefónica -- the European telcos that have published details of employee numbers this year -- have cut 23,770 jobs since 2015, or 4% of their combined workforce that year.

  • On the basis of revenues per employee, Verizon was the most efficient operator in the ranking, generating more than $783,000 per staff member in 2016.

  • Canada's Telus Corp. (NYSE: TU; Toronto: T), one of the few operators to have increased its headcount since the start of 2016, came last on that measure, generating about $196,000 per employee last year.

  • As a percentage of its overall workforce, VEON made the biggest cuts in 2016, slashing nearly one in five jobs excluding its operations in Italy (where it recently merged its Wind subsidiary with 3 Italia to create a joint venture called Wind Tre).

  • Bolstered by its takeover of mobile operator EE, the UK's BT Group plc (NYSE: BT; London: BTA) saw the largest percentage increase in revenues per employee last year, with the figure up nearly a fifth, to more than $296,000, despite an increase in employee numbers.

    Driven partly by merger and acquisition activity, staff reductions have happened as operators have discovered new ways of automating processes thanks to recent technological advances. Germany's Deutsche Telekom, for example, has recently outlined its vision of developing networks it can manage "with no human involvement" through a process of "brutal automation." Together with Spain's Telefónica, it has just launched a new working group within the Facebook-led Telecom Infra Project that will look at using artificial intelligence (AI) and machine learning to improve network management. (See DT: Brutal Automation Is Only Way to Succeed, Facebook's TIP to Launch AI Working Group and 'Brutal' Automation & the Looming Workforce Cull.)

    AI is affecting other telco divisions, too. Vodafone UK, for instance, has been investing in so-called "chatbots" that eliminate the need for customer services staff during messaging-based interactions with subscribers. (See Chatbot Takes Charge: Vodafone's Customer Services Overhaul.)

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    Phil_Britt
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    Phil_Britt,
    User Rank: Light Sabre
    11/24/2017 | 11:48:09 AM
    Re: Technology selection = efficiency of operations = adjustment of headcount = net margin increase
    But with contractors and outsourcers, there isn't the cost of benefits (which not all contractors offer to employees) and other costs. I interviewed a bank president one time who mentioned that one reason to use technology over a human, even if the costs were similar, is that the technology can't come back and sue the bank about termination at a later date (even if lawsuit is frivilous, still costs money to defend).
    Duh!
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    Duh!,
    User Rank: Blogger
    11/17/2017 | 11:35:25 AM
    Re: Technology selection = efficiency of operations = adjustment of headcount = net margin increase
    Excellent point. In all likelyhood, Verizon's revenue/employee figure arises in part from their decision to deploy FTTH through a large part of their footprint, followed by downsizing their field workforce.

    Gabriel Brown's point is also well taken. All those labor costs still show up in the financials, in gross margins, or  capex. It's not as if the companies are lacking for incentives to contract out as much work as possible.
    Gabriel Brown
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    Gabriel Brown,
    User Rank: Light Sabre
    11/17/2017 | 9:43:50 AM
    Re: Technology selection = efficiency of operations = adjustment of headcount = net margin increase
    "revenues generated per employee" 

    Just don't mention the contractors and out-sourcers the company uses.
    Gordy779
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    Gordy779,
    User Rank: Light Beer
    11/17/2017 | 9:07:46 AM
    Technology selection = efficiency of operations = adjustment of headcount = net margin increase
    Very good article but it is not unexpected in that most companies always seek efficiencies of operation and technology is starting to deliver that capability.  This will continue and as AI becomes more appropriate that will also be deployed driving more efficiencies.   

    I will note the metric of "revenues generated per employee" will become a financial icon that will compare one companies operations to another companies operations and that will reflect on the specific technology that a company deploys. 

    For example, the efficiencies of a fiber/wireless based network versus a copper based network.  These costs will directly reflect in the "revenue per employee" number and will drive the deployment of new technologies for greater efficiencies!

     

    Gordon Caverly, RCDD

    Regional Vice-President

    Mid-State Consultants, inc.

     
    Unit
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    Unit,
    User Rank: Light Beer
    11/15/2017 | 9:38:49 PM
    Efficiency Drive?

    I don't think in many cases they are much more efficient, more just outsourcing and offshoring the inefficiency to make it cheaper.

    brooks7
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    brooks7,
    User Rank: Light Sabre
    11/14/2017 | 1:39:38 PM
    Re: Not just automation
     

    The lack of unions is one of the big advantages that the cable guys have.  I remember how much the unions hated FiOS because of the job reclassification.

    I know the article focused on some AT&T numbers.  One thing that I wonder was how much of the reduction was a natural result of the integration of Direct TV.

    seven

     

     
    Duh!
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    Duh!,
    User Rank: Blogger
    11/14/2017 | 12:33:45 PM
    Not just automation
    Don't underestimate Verizon's point about efficiency through network upgrades. A large percentage of the workforce carries union cards and wears hard hats at work every day. Fiber/DWDM/PON/Ethernet/IP networks are a lot less needy than their copper/POTS/TDM/SONET counterparts. Also, as Karl Bode likes to point out, certain Telcos have, um, relaxed their standards for maintaining copper plant.

    Also, contractors don't count as employees. A lot of customer service jobs have been offshored. Labor agreements over the past few periods let them use more contractors for major projects than in the past.

    -- Dan Grossman
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