BellSouth Culls Middle Management

Timing is everything, the saying goes. So what better time of year -- the run-up to the holiday season -- for BellSouth Corp. (NYSE: BLS) to tell 1,500 people they'll be out of a job in about 20 weeks' time. (See BellSouth Cuts 1,500 .)

OK, so there's never a good time to impart that sort of news, but still…

"Reducing workforce is the toughest business decision a company has to make," said Duane Ackerman, the operator's CEO in a prepared statement issued after the markets closed Thursday. "We have worked hard to avoid it, but many companies our size and particularly our competitors operate with lower overhead and fewer management layers."

Fierce competition from the likes of cable operator Cox Communications Inc. (NYSE: COX), which is snatching away traditional voice customers with its triple-play package, is forcing BellSouth's hand in business and operational terms. The operator says it needs to be leaner to "better position the company for success in the competitive broadband marketplace." (See BellSouth Launches Residential VOIP, BellSouth Boosted by Broadband, Cingular, and BellSouth, Sprint Team on MPLS.)

So the carrier is cutting 1,500 "supervisory and non-supervisory management positions, including staff support functions," a move that will cost BellSouth about $95 million in after-tax costs -- with about $50 million to be recognized in the current fourth quarter -- but save it $175 million a year, an average of nearly $117,000 per manager.

BellSouth had 63,049 staff as of September 30, so the cuts represent 2.4 percent of the total workforce.

BellSouth expects voluntary redundancies to account for the majority of the headcount reduction and aims to have the cuts completed by the end of April 2006.

The news follows just weeks after the RBOC unveiled a new operational and reporting structure effective January 1, 2006, and as talk of a potential merger with the new AT&T Inc. (NYSE: T), formerly SBC, permeates the industry. (See Is an SBC/BellSouth Merger Next? and BellSouth Restructures.)

BellSouth's share price closed Thursday at $27.65.

— Ray Le Maistre, International News Editor, Light Reading