Continental Carriers Continue to Cull

Confirmation of the ongoing deterioration of the traditional fixed-line services sector came today, as European incumbent carriers KPN Telecom NV (NYSE: KPN) and TDC Tele Danmark A/S announced job cuts in their fixed-line divisions (see KPN Cuts 800 Jobs and TDC Cuts Nearly 500 Jobs).

The announcements, which affect almost 3 percent of the carriers' total staff, come only days after France Telecom SA (NYSE: FTE) announced its latest staff reductions (see France Telecom Cuts 7% of Staff).

KPN, which employs nearly 30,000 in total, is to cut 800 jobs at its fixed-line division, while TDC is reducing its headcount by 494 from a total of about 21,500. This is the Danish operator's second phase of job losses in its current cost-cutting exercise. "Phase One" saw 1,132 staff lose their jobs in 2003.

The cuts are the direct result of a fall in fixed-line revenues (particularly for voice services) as prices continue to fall, and as customers switch to low-cost rivals and spend more time using their mobile phones. KPN cited "an increase in the number of people who only use a mobile phone" in its press release.

The Dutch operator had already warned that fixed-line revenues are set to fall this year and next, but it expects increasing revenues from broadband and its mobile business (see KPN Puts Faith in B'band and Europe Doubles Down on DSL).

The Danes are also looking to their mobile division for compensation. They've seen their domestic landline subscriber numbers fall from 3.2 million in 1998 to 3 million at the end of 2003, while domestic mobile subscriber numbers increased from 995,000 to 2.4 million during the same period.

In the third quarter of 2003, TDC noted a fall in revenues from all its domestic fixed-line business sectors (retail voice, wholesale, leased lines) compared with the same quarter a year earlier, with the exception of its Internet service business. Its domestic mobile business noted a 7.3 percent revenue increase during the same period.

TDC's broadband subscriber numbers have risen from 136,000 at the end of 2001 to 360,000 at the end of the third quarter 2003.

— Ray Le Maistre, International Editor, Boardwatch

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