The British telephone operators BT and Vodafone, hit by the inflation of their costs, announced within two days of each other tens of thousands of redundancies. BT, which had already started cutting costs in a tough economic environment, announced Thursday it would cut up to 55,000 jobs by 2030.
It intends to have “a much smaller workforce and significantly reduced costs” by the end of the 2020s, CEO Philip Jansen said in a press release. Job cuts represent up to 42% of the 130,000 people employed by the group, directly or through intermediaries. On Tuesday, its rival Vodafone said it planned to cut 11,000 jobs over three years to boost its competitiveness against a backdrop of poor performance and falling share prices for several years.
Both Vodafone and BT have suffered “inflationary pressures, particularly from energy prices,” says Victoria Scholar, an analyst at Interactive Investor. The analyst notes in particular that BT is focusing on digitization and the integration of artificial intelligence, changes that are likely to require fewer workers, she says. The large workforce cuts planned by Vodafone and BT occur in a context of inflation of around 10% in the United Kingdom, the highest in the G7, in a country where the unemployment rate, although at historically low levels of 3.9 %, has risen the last two months.
BT saw its turnover fall by 1% to 20.7 billion pounds in its financial year ending at the end of March, despite a 4% increase in its subsidiary Openreach, responsible for the deployment of fiber in the United Kingdom. Its net profit rose sharply to 50%, but mostly thanks to a one-off tax credit tied in part to the sale of BT Sports, as part of a joint venture with Warner Bros. Discovery. Pre-tax profit fell 12% to £1.7bn.
3 billion in savings
BT says its cost reduction plan, in force from April 2020, is on track “with gross savings of £2.1bn” approaching its £3bn target. The group also indicated during the year that it was merging its Business and International divisions into a single unit, BT Business, to generate cost synergies there as well. He said he expected to see his bottom line recover for the current fiscal year, but warned that cost-of-living and inflation pressures will continue this year.
The job cuts “are intended to make the group’s operations more sustainable,” said Dan Ridsdale, an analyst at Edison Group. According to him, “most investors will recognize the need” for the telecommunications industry to “achieve long-term savings.” But “the magnitude of the reduction” and the disruption this could cause raise concerns, he said.
BT shares fell more than 7% in mid-session on the London Stock Exchange. In December, the group ended a strike movement in the UK by agreeing to higher wages with the unions. But “we have made it clear to BT that we want to keep as many direct jobs as possible,” the CWU sector union reacted in a statement on Thursday. CWU believes that job cuts “should come mainly from subcontractors” but also from “natural” outlets (such as retirements). Patrick Drahi, head of the telecommunications and media group Altice (owner of BFM Business), became the operator’s largest shareholder in June 2021 with 12.1% of the capital. He had increased his stake to 18% a few months later.
Source: BFM TV
