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Telecom’s Tale of Job Cuts

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It should be a good time for the telecom world right now. Carriers are spending billions on new and upgraded wireless networks, cell phone shipments are reaching record numbers, and Internet infrastructure is getting an upgrade too to make way for bandwidth-heavy activities like online video. So why has there been a rash of job cut announcements from some of the world’s largest telecom players?

The handset makers are having a bit of trouble, mostly because of declining average handset prices, thanks to demand of low-cost devices in fast growing emerging markets. Nokia announced recently that it is trimming 700 employees globally with 340 of those in Finland. Motorola has said it will cut 3,500 jobs as it looks to improve operating costs.

Some telecom infrastructure companies with legacies in the phone world are still struggling as they fail to win the big contracts. Alcatel/Lucent said recently it will cut a whopping 12,500 jobs. The new combined company had a pretty rocky fourth quarter and is beginning to lose its grip on some of its core customers. Nortel will cut 2,900 jobs as it tries to turn around its business. Backbone provider Level 3 will cut 1,000 jobs. Carriers aren’t excluded, and Sprint Nextel will cut 5,000 jobs (thanks Sandeep).

The lost workers of these combined companies make up a small army — over 20,000 job cuts (over 25,000 including Sprint).

At the same time companies like Cisco and Juniper are going gangbusters due to the upswing in network spending. “World-wide, spending on new telecom infrastructure is expected to rise to $240 billion in 2008, up 19% from 2005,” according to this WSJ article (subscription required).

The telecom market might be in spending mode right now, but there’s always those that miss out on boom times. Especially if they don’t learn from the past, and prepare better for the future.

5 Responses to “Telecom’s Tale of Job Cuts”

  1. Most of the companies having to drastically reduce headcount are those that built up their work force to supply products and services to the owners of copper-based networks. As these companies get fiber installed closer to the customer, there aren’t nearly as many people required to support the network.

    Look at Verizon, as the FIoS program gets deployed, RIFs follow. They plan to be cash flow positive on FIoS in 2009 and I believe them. Visit a Verizon office in a city where the fiber to the premise network has been up and runnig for a while and the offices are like ghost towns.

  2. Not exactly rocket science – 2 x 2 matrix?

    • Old style telecoms – reducing market
    • New Style (IP) Telecoms – ibcreasing merket
    • Mobile + (simple?) devices in new markets – growth market
    • Mobile + (complex?) devices in established markets – reducing market.

    Reducing market = mergers, layoffs, declining ARPU, desperate search for new revenues
    Expanding market = market share grab pricing, high growth.