Germany's Deutsche Telekom reportedly plans to cut as many as 10,000 jobs at its ailing T-Systems unit, which sells IT services to business customers.
The cuts would represent more than one quarter of the 37,000 jobs at T-Systems, according to Bloomberg, and could save the company about €600 million ($697 million) by 2021.
T-Systems International GmbH CEO Adel Al-Salah plans to reinvest some of that money in growth areas, such as cybersecurity, cloud computing and the Internet of Things, said the report.
T-Systems has been struggling for years and a strategic focus on cloud opportunities has failed so far to offset a decline in its traditional IT business. Its sales for the first three months shrank 2.3%, to less than €1.7 billion ($2 billion), while losses grew to €76 million ($88 million), from about €37 million ($43 million) a year earlier.
The job cuts, first reported by Germany's Handelsblatt newspaper, would equal about 4.6% of Deutsche Telekom's overall headcount, including its T-Mobile US business.
News comes after Deutsche Telekom AG (NYSE: DT) recently announced plans to shave about €1.5 billion ($1.74 billion) in annual operating costs outside the US market by 2021. About half of those savings are expected to come from staff reductions, said the operator. (See DT Targets €1.5B in Automation Savings, Misses Former Target.)
Deutsche Telekom said it would use automation and digital tools to help it achieve the savings. Under that plan, it already claims to have struck agreements on staff reduction measures, including a phased retirement initiative that will go into effect at the end of this year.
According to Bloomberg, about 6,000 of the cuts at T-Systems will happen in Germany.
Deutsche Telekom's international workforce shrank by just 1,000 jobs last year, giving it 217,349 employees at the end of 2017. The number has fallen from 229,686 in 2012.
Still partly owned by the German state, Deutsche Telekom has made the automation and "cloudification" of its network operations a strategic priority. It has been trying to shut down older PSTN networks in Germany and other European markets. Under its "pan-net" initiative, it is also working to replace the various systems that serve individual countries with a single, software-based network. (See DT's Pan-Net Still at Start of the Marathon.)
The overhaul has proven much tougher than Deutsche Telekom had expected, however, and the operator has missed targets for all-IP transformation and related cost savings. Its latest €1.5 billion ($1.74 billion) savings scheme supersedes those earlier plans. (See DT's Epic Undershoot Reflects Transformation Woes.)
Deutsche Telekom appears to be one of several major telcos that have announced hefty cuts to the workforce in recent weeks.
UK incumbent BT Group plc (NYSE: BT; London: BTA), in which Deutsche Telekom is a stakeholder, plans to cut 13,000 mid-level management and back-office jobs in an effort to streamline operations. Those cuts would represent about 12% of BT's international workforce at the end of March. (See BT to Slash 8% of Jobs in Efficiency Drive.)
Earlier this week, Australia's Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) said it would slash 8,000 jobs -- about one in four positions -- as it looks to arrest a long-term market slide. (See Investors Unmoved by New Telstra 4-Year Plan.)
The cuts are aimed at eliminating four layers of management and delivering about A$1 billion ($739 million) in cost savings over the next four years.
Deutsche Telekom's share price closed down 1% in Frankfurt earlier today.
— Iain Morris, International Editor, Light Reading