Telefonica to shed 3,421 jobs this quarter

The Spanish incumbent has been working on a headcount reduction plan for a couple of months with a view to boosting cash flow as part of a broader restructuring effort at its domestic business. To date, it hasn't had a lot to say on the matter, largely leaving public announcements to the unions, which naturally had pretty strong views on the subject. But now it is speaking out to share certain details of its plan.

The headline news is of course that 3,421 figure. It is lower than it might have been. Just last month trade union UGT revealed that the telco had identified a total of 5,100 positions as surplus to requirements.

The layoff plan will see employees turning 56 years or older in 2024 and with a seniority of more than 15 years offered an exit. The operator may also place limits on employees joining in certain areas, or broaden the redundancies "based on business reasons," it said.

The redundancies form part of an overall plan, dubbed the Third Collective Bargaining Agreement, which will run until the end of 2026 and can be extended by a further 12 months. Aside from sharing the number of layoffs, Telefonica did not share the content of the plan, but it presumably includes other measures designed to keep the unions happy. UGT in particular has been vocal in its insistence on certain guarantees to protect the workforce in areas such as voluntary relocation and forced migration.

Telefonica did not address these areas; it simply said it had secured the unanimous support of representatives from UGT, CCOO and Sumados.

The plan will not come cheap, its cost estimated at around €1.3 billion before tax. However, Telefonica expects to bring in annual cost savings of an average of €285 million from 2025. In addition, it will see a positive impact on cash generation from this year, "since the departure of employees is expected to take place during the first quarter of 2024," it said.

Telefonica is talking a good game when it comes to the reasons behind its staff cull. The plan will help it become "a more digital, flexible and prepared company for future challenges in a highly competitive context and massive transformation," it said, in addition to sharing a list of benefits for its remaining staff – reskilling and so forth – and referencing its ability to attract new talent.

It is indeed undergoing something of a transformation, like its peers across Europe. Managing director José María Álvarez-Pallete even went as far as to describe the company as a supercomputer when he fleshed out its strategic plan in November.

But that new strategy is about finances as much as it is digital transformation. It is called the GPS plan, the initials standing for Growth, Profitability and Sustainability, and it has an increase in free cash flow generation and the reduction of debt at its heart. Reducing headcount will naturally help with that.