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NTL Confirms Job Cuts

ntl group ltd. (Nasdaq: NTLI) today announced plans to axe 6,000 jobs by the end of 2007, confirming media reports from the past few days. (See NTL Adds to UK Jobs Woe.)

The U.K. cable operator announced the cuts, which account for more than a third of its workforce, as part of its first-quarter financial report, its first earnings since the merger with Telewest. (See NTL Telewest Reports Q1 and NTL & Telewest: Together at Last!)

CEO Simon Burch told a conference call that half of the cuts will come from attrition and redundancies while the other half will be outsourced, including 1,500 jobs that will be shifted to IBM Corp. (NYSE: IBM). Burch said none of the job losses will affect "customer contact positions" in the firm's call centers, but will hit back-office support functions, such as marketing, where there are duplicate positions following the merger.

But the reorganization could provide an opportunity for NTL to deal with its "customer contact" problems, according to Ovum Ltd. analyst Angel Dobardziev. In a research note, Dobardziev writes: "The obvious area to address with this outsourcing approach is customer service. Both NTL and Telewest had poor reputations in this area."

Dobardziev adds that "despite the merger, the new entity is still unprofitable. Although the trend is improving, this explains why further cost cutting through outsourcing is a necessity."

The operator reported revenues of £611 million (US$1.14 billion), up 23 percent year on year, and a net loss of £119.9 million ($223.1 million). That compares with revenues of £494.4 million ($920 million) on a net income of £455.8 million ($848.2 million) in the first quarter of last year, which included a gain of £514.6 million from the sale of its broadcast division. The £119.9 million loss includes costs of £16.3 million ($30.3 million) in merger and related fees, in addition to increased interest on debt to finance the deal.

NTL expects to save at least £250 million ($465.2 million) in costs by the end of 2007 as a result of the merger, and plans to speed up the pace of the integration with Telewest to reach those cost savings sooner rather than later.

It also faces the task of integrating its new mobile operations, as it has just received clearance from the U.K.'s Office of Fair Trading to acquire Virgin Mobile Telecoms Ltd. (See Virgin Accepts NTL Offer.)

NTL stock was up 59 cents (2.12%) to $28.40 in midday trading on the Nasdaq.

— Nicole Willing, Reporter, Light Reading

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