Carrier workforce challenge: Balance

The telecommunications industry is in the midst of a massive upheaval in their attempts to satiate consumer thirst for all things wireless. This upheaval is most obvious at companies with sizeable holdings in both wireline and wireless operators, notably Verizon Communications Inc. and AT&T Inc., and is being felt by their respective workforces that are seeing their ranks shrink on the wired side and at least remain stable for wireless.
Both companies have been very aggressive in their cost cutting during a time of economic turmoil, with much of those cuts coming in headcounts. Verizon has already cut 8,000 jobs this year and executives recently noted the company is planning an additional 8,000 cuts before the end of the year with more to come.
“As I indicated on our last earnings call, although we have been taking steps to mitigate the negative impacts of the economy in the short term, we need to reduce the wireline cost structure more significantly over the next 12 to 18 months,” said Verizon CFO John Killian, during a Bank of America Merrill Lynch conference last week. “From a headcount perspective, as the business has changed, we have shifted force to the growth areas, and we have been steadily reducing our overall workforce size. But we realize that we need to do more and at an accelerated pace. In the last 12 months, wireline headcount has been reduced by more than 8,000 and we plan to do more than 8,000 in force and contractor reductions in the second half of this year, with more to come in the next couple of years.”
(It should be noted that the cuts come from an overall workforce at Verizon of more than 230,000 employees.)
Killian noted that while the straight cuts would come from Verizon’s wireline business, the company was also looking at other ways to streamline its workforce across the board.
“We are contemplating steady dial tone really over the next several years of continuing to drive out the kind of numbers that I’m talking about in the remainder of this year, that we believe as we look at the business that there’s opportunity both with the use of technology, the use of some of our own services, convergence within the business,” Killian added. “We recently converged the Verizon business and Verizon Telecom network. We think there’s opportunity around that. … I think we had a very big force reduction. But to be honest, we have been on a path. We just need to accelerate.”
While Verizon has said most of its cuts are planned for its wireline business, it is moving quickly ahead with expanding its wireless operations. The company noted during its second quarter financial call that its wireless operations accounted for 57% of its revenues and that following a pending sell off of wireline lines it expects wireless to account for 60% of revenues.
The carrier is also moving at a furious pace in launching its LTE technology in Seattle and Boston by the end of the year and to cover 100 million potential customers in 30 markets by the end of 2010. Executives noted that much of its wireless spending in 2010 would be on its LTE deployment that would come at the expense of spending on its legacy CDMA-based network.
Same story, different company
Over at AT&T, the message is similar: Wireless is set to grow at the expense of wireline.
AT&T CFO and Senior Executive VP Richard Lindner said the company had cut nearly 6,000 jobs during the second quarter and 14,000 for the first half of the year, adding: “We have good momentum in margin opportunity in our wireless business.” (AT&T employs around 295,000 people worldwide.)
The company’s focus on wireless was highlighted by recent announcements of enhancement plans for its network including the continued addition of 850 MHz spectrum to support its 3G network to expand coverage and more recently announced plans to roll out HSPA 7.2 capabilities on its network that will lead to the planned roll out of LTE beginning in 2011. Both announcements will require a renewed focus on deploying employee assets on network management as well as additional services to support increased network speeds, including cell site and backhaul upgrades.
While neither company has said it plans to load up on employees for their respective wireless divisions, and with the current economic malaise that is to be expected, their focus on building and maintaining their increasing important wireless businesses shows there might be light at the end of the tunnel.