Telecom Layoffs Under the Head of Cost Cutting

Even when mobile operators are making fortunes out of their businesses in Pakistan, their yearly objective still remains to slash as much expenditure as possible – which is natural for a business.

The meaning of expenditures, however, varies. Managers, Senior Managers and Directors make their way from Islamabad for regional meetings, stay at lavish hotels, dine at starred restaurants — but when it comes to cost cutting, good quality tissue paper is replaced with bad one in the company headquarter. That’s like deleting text files to create space on your 500 Tera Bytes hard disk.

Such kind of irrational spends and then layoffs (or even outsourcing the workforce by shifting resources to a third party) in the name of cost cutting is yet to make sense.

Station at equipment vendors is not different. Let’s have a look at them:

Pakistani Telecom Vendors:

One of country’s biggest cellular operators is now planning to cut short its security staff from the physical site locations in order to cut its operational expenditures. They have 11,500 guards for 6,500 sites and that is a big number. For equal number of sites, another operator has lesser guards.

Another major expenditure is the capital an operator has to set aside to give out as rent to the owners of lands/buildings where their sites are plotted. This rent is, in one way, security money as well. An operator is not bound to pay anything more. Thus operators are now moving to cut the number of guards allocated to sites installed on lands owned by vaderas as the rent which an operator pay for such sites inherently include the owner’s responsibility of site’s security.

That’s for the cost cutting on non-technical staff.

In operators, usually, the technical division never gets in the firing line. For other work forces like SMEs, contractors and sub-contractors, the layoff is done with independence of technical expertise. Sub-contractors are known for releasing human resource the moment a project with telecom operator/vendor terminates but positions in telecom operators are by far considered most secure. In fact ‘complacent’ is a word more suitable. News such as in July this year, Wateen’s layoff of 20% of its workforce with majority of them from technical division is rarely spotted.

Global Telecom Vendors

Telecommunication equipment providers are responsible for innovating and later introducing that innovation to service providers. So purposefully their work force comprises almost 50% (figure now varies due to major outsourcing done in recent years) of Research and Development personnel mastered in fields of digital radio communication and micro electronics; second highest is the number of the operations and maintenance personnel.

So, a vendor’s sole business to sell its equipment or its technical expertise to a mobile services provider. Thus, when a vendor runs out of business, its way to curb expenditure is by releasing off its resources.

Considering the recession phase which impacted severely on global telecom vendors in last few years saw a record lay off per annum. The trend for telecom vendors depicts that the slashing wave first hits the fraction of marketing and sales personnel before digging down at the technical staff.

Last month, French vendor Alcatel-Lucent made public that it’ll cut over 5000 jobs worldwide to avail 1.25 billion Euros in cost savings. Interestingly, the company has a work force of 76,000 globally and this lay off will only see sales and HR personnel exiting the door while the 26,000 Research and Development staff will stay put.

Nokia Siemens Networks, known to have recently run out of business from Pakistan, announced that it will cut almost 17,000 jobs by end of 2013.

Here’s an overview of the situation:

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  • ImranG

    Good article but you only pointed out the problem but any solution.

  • Majid Farid

    Article touches only part of the issue. What is missing is benchmark of OPEX to revenue ratio’s. You don’t go and look into number of guards however you do see for a country like Pakistan with GDP of lets say around 1000$ ..Mobile customers around 80 million, hourly rates ranging from 12$ to 35$ (average) what is the global benchmark. Once you know the ratio then you can drive your strategy for OPEX reduction if required.

    Second senario could be that your OPEX is in line with global trends however since growth is hard to get and ARPU is low what more can you do to manager your OPEX better. If I as telco operator buy a service for Cell site security at a price that is 30% or 40% less than what I spent…I really wouldn’t care how many guards are deployed as long as the services delivery is managed according to the contract.

    Our neigbouring country has set global example of how to innovate when it comes to OPEX and CAPEX optimization. We should read into Bharti case study of managed capacity model as well.

  • observor

    Where does one find the logic in this article? No citations of sources? No global bench marks for Operations? Why is that you failed to put Ericsson’s name in your chart, instead you mentioned Nokia! How on earth can you compare a company manufacturing mobiles with a infrastructure/solution company? Doesn’t make any sense.

  • Saleem

    Boring post. Writer has not done homework before writing on such important topic. I just wander on one thing about our Pakistani most of writers is that A JEALOUSY FACTOR shows in their posts when they likes to write about companies. Living in hotels, accommodations having good vehicles etc etc should not be discussed because its benefits and privileges that any good company gives to its employees. Google, Apple, Facebook, Windows, Oracle, SAP, JP Morgan, Citi Bank, WSJ and so on… all gives top class benefits to their employees but I never reads in Mashable, TechCrunch, GigaOM, Guardian, BBC, PCworld, and many other sites very personal about these companies internal matters. Please try to be professional and let people work and live as they do. On small small point of views majority starts abusing in a way that a abuser is SAINT and all are sinners. Please don’t touch personal things and just stay professional. Thank you.