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.
