RealTime IT News

BT Joins the Job Cut Club

Executives at British Telecom, the U.K.'s version of the incumbent local exchange carrier (ILEC), announced Monday a 16.7 percent workforce reduction to bring costs in line and return to profitability within the next three years.

The news comes as no surprise to anyone in the industry as it marks the carrier's addition to the ranks of telephone companies making concessions to adjust for a lousy year in telecommunications.

Ben Verwaayen, BT chief executive officer, said the company is the first to acknowledge its shortcomings and "come clean" with a sensible plan for the future.

"There will be no (initial public offerings), no burying our heads in internal re-structuring," he said. "We will achieve profitable growth and (manage) our finances with great discipline."

Unfortunately, the decision to cut roughly 5,000 jobs over the next three years is nothing new in the voice and data carrier industry. Companies throughout the U.S. have been using a similar strategy for more than a year to bring costs in line.

Last month, SBC Communications (the second-largest Bell in the U.S.) announced more job cuts in 2002, despite having already cut 7,500 employees from the roster in 2001 and consolidating call centers throughout its coverage area. Qwest Communications , another ILEC in the U.S., fired 4,000 employees and reduced capital expenditures in 2002 by more than $2 billion.

Late last year, Broadwing cut 15 percent of its workforce and closed eight of its 11 data centers nationwide, while Genuity, a subsidiary of Verizon Communications , announced the cutback of 990 jobs (or 22 percent) in its division.

Like American carriers, BT has a plan of its own to bring its costs in line and remake itself into a healthy organization. The plan includes a "relentless focus on customer satisfaction" (by reducing customer complaints by 25 percent every year) and financial discipline, along with an internal restructuring (despite words to the contrary by Verwaayen) that puts all BT networks under one unified command.

The U.K. carrier also plans on a large-scale broadband deployment of digital subscriber line (DSL) service around the country to spur sales. With 1,010 central offices (COs) already in place, officials plan on expanding coverage to fill in the gaps throughout the country.

In February, BT set the stage for high-speed growth with the price reduction (to roughly $40 a month) across the network of its asymmetric DSL (ADSL) service. Officials expect to hit the one million ADSL milestone sometime in 2003.

"We pledged last month that we would put broadband at the heart of BT moving forward," Paul Reynolds, BT Wholesale chief executive officer said Monday. "People have told us, in sufficient numbers, that they want broadband services and the advantages of always-on, fixed cost, fast access that they offer."

BT expects the changes to help the carrier post a profit margin of 28-30 percent by year's end and make them positive free cash flow sometime in 2003. Capital expenditures will be reined in to just under $3 billion.

"By focusing on delighting our customers, achieving good growth from sensible investments and by setting our objectives to stretching but achievable aims, BT can return to its rightful position as the benchmark of the industry," Verwaayen said.