Russia's MTS to Cut 1,000 Jobs as AI, Chatbots Arrive

BARCELONA -- MWC 2018 -- Russian mobile and fixed-line giant MTS is planning to cut about 1,000 jobs at its customer services division this year as it continues to automate and digitalize operations.

The operator has about 8,000 customer service assistants at its mobile business and another 3,000 addressing fixed-line issues. Yet to report annual results for 2017, it had a total of 69,470 employees on its books at the end of 2016, but has been cutting headcount to boost profitability.

Kirill Dmitriev, the head of sales and customer services for MTS, says the number of staff in contact centers for the mobile business fell by around 7% last year. In 2018, he tells Light Reading, the goal is to slash between 10% and 12% of those jobs. The rate of cuts could reach 15%, however, if digital transformation gathers pace.

Mobile TeleSystems OJSC (MTS) (NYSE: MBT) is currently piloting two chatbots that could in future be used for customer service interactions with millions of subscribers. One of them has been developed internally while the other is the fruit of a partnership with an external company, whose identity MTS has not disclosed. A more widespread chatbot rollout is planned for later this year.

With that launch in mind, the operator has also recruited a Russian artificial intelligence (AI) expert, Arkady Sandler, who is now in charge of AI development for MTS.

"His focus is to help us implement AI into chatbots and reduce calls and make service operations more digital," says Dmitriev.

As several operators have already demonstrated, the most sophisticated chatbots are able to communicate with customers as, if not more, effectively than humans. By relying more heavily on these tools, companies hope to make significant cuts to their customer service teams. (See Chatbot Takes Charge: Vodafone's Customer Services Overhaul.)

For MTS, chatbots and AI are just a part of the efficiency drive. The operator has been encouraging its subscribers to rely on digital channels through the launch and expansion of its own My MTS app. Around 11 million Russian customers, or 14% of the total, were using My MTS at the end of September, up from 7.2 million a year earlier.

Besides allowing customers to buy other MTS services, the app is also a tool for "self-care," says Dmitriev. "A higher number of customers using the app means a lower number of incoming calls and lower headcount," he explains.

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As digital channels have expanded, MTS has made some progress on shrinking its bricks-and-mortar presence. It closed 484 Russian retail stores in the first nine months of 2017, leaving it with 5,710 at the end of September. (See Russia's MTS to 'Sacrifice' Connectivity in Software Rebirth.)

"We're eager to close further stores and enhance profitability and improve the cost base," says Dmitriev. In Russia, the company's operating margin (before depreciation and amortization) rose by 1.9 percentage points in the third quarter of 2017, to 43.8%, compared with the year-earlier quarter. "Cost optimization in retail" is cited as a major reason for the margin improvement in the operator's earnings report.

MTS's Russian revenues rose by 3.2% in the third quarter, to 106.3 billion Russian rubles ($1.54 billion), compared with the year-earlier period.

Through an efficiency initiative called One Window, MTS is now streamlining retail and contact center systems in an attempt to simplify many of its internal processes as well as customer services.

Dmitriev says that "pop-up windows" containing information about specific customers could help to improve interactions between customer service assistants and subscribers. "We can enhance efficiency in terms of how and what we sell," he says.

— Iain Morris, News Editor, Light Reading

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