France Telecom Cuts 7% of Staff

France Telecom SA (NYSE: FTE) is to cut 14,500 jobs, almost 7 percent of its global workforce, during 2004, with 8,800 staff to be laid off in France and the majority of the remaining 5,700 posts to be lost in Poland at subsidiary Telekomunikacja Polska SA (TPSA).

The French incumbent currently employs about 216,000, 126,000 of whom are based in France. The majority of the cuts in France will involve early retirement schemes, while some staff will transfer to French civil service posts. And while TPSA will suffer the majority of the cuts outside France, some jobs will also be lost in the U.K., though no further details were available as this article was published.

The French carrier cut its workforce by 13,000 in 2003, including 7,500 reductions in France.

The announcement comes as the carrier takes the latest step in its companywide rationalization program. According to a European telecom analyst, France Telecom is about to embark on a massive business re-engineering project to align software systems and practices across its various business units.

The project is similar to those already underway at other large operators such as BT Group plc (NYSE: BTY; London: BTA), Sprint Corp. (NYSE: FON), and AT&T Corp. (NYSE: T). (See Sprint Gets Its OSS in Gear and AT&T Ponies Up $500M More .)

The scheme is part of the carrier's ongoing "TOP Program" that France Telecom executives hope will save the carrier billions of dollars and help cut its monster €59 billion (US$73 billion) debt. The program began early last year with a focus on cutting the number of external suppliers, with a view to saving €4 billion ($4.9 billion) during the 2003 to 2005 period. In November, France Telecom said it was on course to save more than €700 million ($865 million) in 2003 alone as a result of the "Top Sourcing" program.

The industry analyst, who requested anonymity, says staff at the carrier's various businesses, including international services provider Equant (NYSE: ENT; Paris: EQU) and international mobile operator Orange SA, will now have to work in tandem with executives at the parent company as they plan upgrades and changes to their back-office systems. Until now, each business has made such decisions autonomously.

It is unclear how much the carrier believes it can save from such an exercise, or whether there are any major contracts to be awarded as part of the process. France Telecom failed to respond to repeated requests for comment.

The aim of such projects is to increase efficiency and make the carriers more customer-friendly, says Mark Basham at OSS Observer (who is not the source for this story). If executed properly, the resulting systems and practices can save operators time and money, and make them much more responsive to customer needs.

"It's the right thing to do, and all the major carriers need to do this, but it needs massive backing from executives at the very highest level," says Basham. "The potential benefits are enormous, but there are plenty of opportunities for failure, too. While the driving force is to become more efficient and customer-centric, they need the right systems to enable the staff to implement those changes."

One of the major problems faced by large operators is that they hold tens of millions of customer data records on separate databases and in different formats. "As soon as a customer has a number of different services, things start to get messy. There's no coordination," says the OSS Observer man. This is a particolar issue with small business users, which might require a variety of voice and data services from one operator but have to deal with various units of the same company and receive a number of separate bills, states Basham.

— Ray Le Maistre, International Editor, Boardwatch