Vodafone Spain to Cut up to 1,200 Jobs

Vodafone's Spanish subsidiary has warned of job cuts that could affect up to 1,200 employees, nearly one quarter of its entire workforce, according to Vodafone Group's most recent annual report.

The operator said it was taking steps to reduce headcount after a fall in sales and profits for the first half of its current fiscal year. Vodafone Group plc (NYSE: VOD)'s latest earnings report shows that service revenues in Spain dropped 5.2% in the six months to September, to around €2.2 billion ($2.5 billion), compared with the year-earlier period. Earnings (before interest, tax, depreciation and amortization) tumbled 28%, to €542 million ($625 million).

Vodafone España S.A. blamed exponential growth in demand for telecom services without any corresponding increase in prices. Nearly half of all new customers are using low- or medium-cost offers, forcing it to make cost reductions, it said in a statement.

It also hinted at changing customer needs in the digital economy. Customers increasingly want a simpler and more immediate relationship with Vodafone, said the operator, implying that some customer-facing roles are becoming obsolete as consumers turn to digital channels and tools instead.

Workers' representatives have accordingly been notified of a so-called "collective dismissal procedure" that will affect up to 1,200 employees. A consultation period will start at the end of January and last for a month.

At the end of that process, Vodafone said it would try to come to an agreement with workers' representatives on layoffs.

In its statement, Vodafone said the move was justified for "economic, productive and organizational" reasons.

Vodafone's Spanish business has recently struggled to fend off competition from incumbent operator Telefónica and a resurgent Orange Spain in the market for both fixed and mobile services. It has also been challenged on prices by Másmóvil, the country's number-four network operator. (See Vodafone Weighs Towers Sale, Swings to Net Loss for H1.)

Headcount at the Spanish business has already fallen considerably since the 2016 fiscal year, when there were 5,935 employees at Vodafone Spain, according to Vodafone's annual report.

The update is a further troubling sign for employees in the global telecom industry: According to data compiled by Light Reading, the world's 20 largest operators with headquarters in Western Europe and North America cut around 107,000 jobs in 2016 and 2017, a figure that equals about 6% of total jobs at those companies before the period in question. (See Big Telcos Have Slashed 107K Jobs Since 2015.)

While many of those companies have yet to publish employee data for 2018, the trend shows little sign of abating. US telco giant AT&T Inc. (NYSE: T) appears to have cut about 10,720 roles in the first nine months of 2018, for instance, while Verizon Communications Inc. (NYSE: VZ) slashed 3,100 jobs over the same period. (See AT&T, Time Warner Shed 11K Workers in First 9 Months of 2018.)

Vodafone Group cut around 5,400 jobs in its 2017 fiscal year, leaving it with 106,000 across the entire organization, although the divestment of its Dutch business lowered headcount by 3,000 workers. (See Vodafone Rewards Top Brass as Thousands of Staff Are Axed.)

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

As Vodafone Spain indicates, operators have been cutting jobs to bolster profit margins while sales growth remains elusive. A spate of new technologies is now helping them to automate some tasks and making it easier to lay off staff.

Those technologies include digital voice assistants called "chatbots." Powered by artificial intelligence, these can today handle many of the queries that a customer would previously have raised with a customer service assistant.

Vodafone's UK business has developed a chatbot called TOBi that is now being introduced into other markets. The UK business witnessed a sharp fall in staff numbers in the 2017 fiscal year, losing 859 of its 13,238 employees. (See Agents Down: Vodafone's Chatbot & the Jobs Threat.)

Automation now threatens to claim jobs in other parts of the business, too. On the networks side, clever software tools can increasingly handle the tasks usually assigned to engineers.

Forthcoming 5G networks will increasingly be able to redirect traffic in congested areas, and tackle other technical problems, without the need for human intervention, according to network equipment vendors and software companies that serve the telecom industry. (See Apstra Bags Bloomberg in Its First Campus Deal.)

Several big operators have now warned of forthcoming job cuts, including US telco giant AT&T and UK phone incumbent BT Group plc (NYSE: BT; London: BTA). Belgium's Proximus today said it would cut 1,900 employees as it takes advantage of new digital technologies, although it also plans to recruit 1,250 new digital workers. (See BT looks more bloated than ever, AT&T's 5G Exec Outlines a New Round of Layoffs – Report and Eurobites: Proximus slims down for its svelte digital future.)

The job cuts are not limited to operators, however. Swedish equipment vendor Ericsson AB (Nasdaq: ERIC) has cut about 17,000 jobs since the start of 2017, leaving it with about 94,500 at the end of September, while thousands of jobs are under threat at Finnish rival Nokia Corp. (NYSE: NOK), which recently announced plans to cut €700 million in annual costs over the next two years. (See Ericsson Will Take $860M Hit to Prop Up Digital Services and Nokia Warns of Job Cuts in €700M Shake-Up.)

Both vendors have recently suffered a slump in telco spending on network gear and faced mounting competition from Chinese rivals Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763).

— Iain Morris, International Editor, Light Reading

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