With negative revenue growth in at least 6 out of 14 markets where Telenor Group operates, the CFO has finally said that workforce reduction in inevitable.
Jorgen Rostrup, Chief Financial Officer at Telenor Group, while responding to a question during investor conference last week, said that in order to control operating expenditures down the line, workforce reduction can’t be avoided.
With revenues shrinking in majority of markets, the Group is reportedly working on opex-cut during next couple of years.
“Sales, marketing and personnel costs make up almost half of Telenor’s cost base, and need to come down”, said the CFO.
The Group, as a whole, is struggling to define its digital strategy — that it earlier hoped would be enough to deal with declining revenue — mainly due to increased competition from digital content providers.
The real challenge kicked in when the investments made by Telenor Group in digital content didn’t offer any ROI due to behavioral differences of Telenor customers in developing countries.
While Telenor wants to compete with the likes of Netflix and Spotify — as it acquired few companies in these verticals in the last two years — consumers in developing markets don’t tend to pay for such services due to loose regulations and availability of free alternatives.
Telenor Pakistan, for instance, introduced a paid music streaming service for its customers in Pakistan but — as you would have guessed — the service didn’t do well due to a fact that consumers here tend to gravitate towards the countless free alternatives available to them.
With declining revenues from conventional (voice and SMS) services, and free content available to consumers, telecom operators are feeling the heat.
A question sent to Telenor Pakistan about the magnitude of impact on local operations went unanswered.
With overall (YoY) organic growth of Telenor Group at just 1%, the pressure is going to be felt here in Pakistan as well.
We don’t yet know the time and number of reduction that Telenor Pakistan will undergo, but it is very clear that this is something that’s bound to happen, sooner or later.