Europe Hit With Big Telecom Jobs Cuts
News of redundancies at Virgin Media Inc. (Nasdaq: VMED) and Cable and Wireless plc (NYSE: CWP) in the U.K., Telekom Austria AG (NYSE: TKA; Vienna: TKA), and Nokia Networks followed Monday's news that Nortel Networks Ltd. is to reduce its staff numbers by an extra 1,300 posts, with European jobs likely to be among the casualties. (See Nortel Culls 1,300 Jobs, Loses $3.4B.)
They also came as mobile giant Vodafone Group plc (NYSE: VOD), which has significant operations in Europe, announced plans to reduce operating expenses by £1 billion (US$1.5 billion) per annum by its 2011 financial year, though it didn't provide details of how those cuts would be achieved. (See Vodafone Adjusts to Hard Times .)
Virgin Media to cut 2,200 jobs
U.K. cable giant Virgin media (formerly NTL) unveiled its new strategy to investors and analysts today, and the plans include a headcount reduction of 2,200 posts, about 15 percent of its current 14,600 workforce.
The redundancies will begin late in 2009 and be completed by the end of 2010. Virgin believes the reduction will cuts its annual operating costs by more than £120 million ($185 million) by 2012.
But the cable operator, which recently restructured its debt and announced a slightly disappointing third quarter, isn't planning to cut costs across the board. The management believes Virgin, which competes with the likes of BT Group plc (NYSE: BT; London: BTA) and Sky for triple (or even quad) play customers, is well placed to attract and retain customers with high-speed broadband services and drive new revenues from value-added content offers, and so plans to stick with its network investment plans. (See Virgin Media Reports Q3 and Virgin Gets Lender Support.)
CEO Neil Berkett told investors he expects capex rates in the coming years to be at the high end of the operator's previously announced range of between 13 and 15 percent of revenues. (See Virgin Trials Interactive Ads, Virgin Bows Mobile Broadband, Virgin Trials 40-Gig, and Virgin Media Boosts Broadband.)
Virgin Media's share price is down $0.20, or 3.5 percent, to $5.50 today, giving the cable operator a market value of $1.8 billion.
Telekom Austria axes 1,200
Central European powerhouse Telekom Austria is ridding itself of 1,200 staff from its Fixed Net operations as part of its ongoing restructuring program, but at a significant cost. (See Telekom Austria Cuts Jobs.)
Because the staff in question are civil servants (state employees) the operator cannot, under Austrian law, simply cut their jobs. Instead, the carrier has decided to pay off the employees during 2009 at a cost of €630 million ($805 million), with the one-time charge being included in the carrier's fourth-quarter results.
Telekom Austria, which noted that "against the backdrop of a shrinking domestic fixed line market, downsizing measures are imperative," has initiated a "social plan" that will provide the 1,200 employees affected with "the basis for a new start."
That charge will hit the carrier's full-year results, which are now expected to show a small net loss instead of profits. The operator, though, is still expecting full-year revenues to grow by 5 percent and says the headcount reduction will not affect operating performance and will ultimately improve earnings. The carrier's share price is up €1.05, nearly 11 percent, to €10.75 today.
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