Desperate measures

By The Informer

They say that desperate times call for desperate measures. But the following sentence from a Telekom Austria (TA) financial news release issued this week had the Informer diving for the phone in slow motion, emitting a distorted, bass “Nooooooooooo” as he tried to stop the impending madness:

“In November 2008 a further step in the restructuring program was taken including the implementation of additional social plans as well as a redundancy scheme for up to 1,250 Fixed Net employees to be executed throughout 2009.”

Eh? Has TA lost the plot, the Informer wondered? Is it standing at a window waving a gun, like a spurned husband crazed with jealousy – yelling that, if he can’t have her, no-one will? Has it turned into a telecoms version of David Koresh’s Branch Davidians? Is it actually going to execute 1,250 employees?

After a moment’s panic the Informer realised that it was the redundancy scheme that would be executed, and not the employees themselves. Phew!

TA reported a group net loss for Q408 of E438m, compared to a profit of E41m in the same period last year. The full year loss hit Eur49m, down from a profit of Eur492m in 2007.

On the mobile side there was positive news, though. Operating income for the firm’s mobile arm mobilkom was up 8.1 per cent year on year to E689m in 2008, compared to E637.5m in 2007. The number of customers in the Mobile Communication segment grew by 15.2 per cent to 17.8 million customers as of December 31, 2008. More than three-quarters of this customer growth was driven by an increase of the contract subscriber base, the firm said.

TA is not alone in the job cutting stakes, with Canadian vendor Nortel‘s scythe a-swishing once more this week. (It can’t be long before Nortel is actually going to have to start recruiting new people just to be able to carry on making the job cuts that it needs to be seen to be making.) Another 3,200 Nortelians are heading for the door, with CEO Mike Zafirovski squeezing the following solitary drop from his now bone dry bottle of reassuring platitudes:

“We remain deeply committed to our customers and are staffed to meet their needs as we take the necessary actions to strengthen the company,” he said. Zafirovski won’t be getting his bonus, either. The board of directors has also approved a recommendation to withhold all bonuses under the Nortel Annual Incentive Plan (AIP) for 2008.

Sticking with redundancies from industry vendors whose names begin with ‘N’, let’s have a look at Nokia, which this week – instead of ordering the requisite number of employees off the premises – asked that they nominate themselves for dismissal. The handset manufacturer has asked for 1,000 staff to step up and step out, and will be making available a voluntary redundancy package on March 1st for three months. Senior execs aren’t allowed to join in, so there goes the easy money for the board.

Nokia says that the new voluntary measures aimed at reducing personnel-related costs will lessen the need for involuntary redundancies and will be supported by wider use of short term unpaid leave and sabbaticals. Earlier this month, the company said it is closing one of its research and development sites in Finland and temporarily laying off workers at another.

The news was slightly better at Nokia’s infrastructure sister, Nokia Siemens Networks, though. This week the vendor picked up deals worth E880bn from China Mobile and China Unicom. On Wednesday, NSN said China Mobile and China Unicom had signed framework agreements valued at RMB7.6bn (Eur880m), to purchase 2G and 3G mobile equipment and services during 2009.

Under the framework agreements NSN will roll out WCDMA networks for China Unicom in 11 provinces across China, and will provide China Mobile with TD-SCDMA and GSM networks.

It may be that there’s also money to be made in one of the world’s other fastest growing markets, India. State-owned BSNL and MTNL have each announced 3G service launches this week. BTNL has rolled out 3G services in an additional 11 cities following on from the launch of its first 3G service in Chennai earlier this month. According to a statement, BSNL has invested $530m in 3G infrastructure. MTNL, meanwhile, has begun 3G in central New Delhi with the stated aim of attracting 200,000 to the service within two years.

It seems a bit unfair, but while the auction of 3G licences has been repeatedly delayed in India due to ongoing disputes between the government and the regulator, BSNL, as a state-owned operator, has already been allocated 3G spectrum in each of India’s 23 ‘circles’ or regions apart from New Delhi and Mumbai where MTNL has been allocated 3G spectrum. Both BSNL and MTNL have a 5MHz slot in the 1920-1980MHz frequency band paired with another 5MHz channel in the 2110-2170MHz frequency band.

Back to the fond farewells, though, and TWLMOBR (the world’s largest mobile operator by revenues), or Vodafone, announced cuts of its own this week, with 500 UK employees being given the old heave-ho. The move is part of Vodafone’s cost saving programme, which is targeting a £1bn reduction in operating costs by the 2011 financial year.

At Aussie carrier Telstra, meanwhile, the departures this week were fewer but arguably more significant. The firm’s CEO, Sol Trujillo, announced on Thursday that he is to leave Telstra and return to his US homeland. He didn’t offer up any explanation for his move, which will take effect on June 30th this year. However, wild speculation in the press suggests that if Trujillo stayed more than four years in Oz, he would be liable to pay tax on income earned from offshore investments as well as capital gains tax on shares. Coincidentally, Trujillo’s four year anniversary at Telstra comes up later this year.

Then again, he’s not had the calmest tenure, frequently locking horns with the Australian Government over the country’s proposed national fibre network, and upsetting Aussie ‘mom and pop’ investors with fluctuations in the share price.

The most controversial aspect of Telstra’s proposal for the fibre network was that the company’s bid is tied to assurances that the government will seek no further separation of the operator. Telstra’s rivals, including Optus, have been calling for the government to split Telstra’s network business from its retail and wholesale arms in a bid to promote competition.

And while Telstra bids adieu to its CEO, US vendor Motorola has packed sandwiches and a flask of coffee for its Good Networks mobile email unit and sent it on a little journey, all the way to messaging specialist Ahhh Visto. This strengthens Visto’s position in the enterprise mobile email space but is another disappointment for Motorola which has only had hold of Good since 2006.

Just as the Informer was preparing to wrap up this week’s rather disheartening edition of AWIW, European carriers Telefonica and Deutsche Telekom shone a little ray of sunshine on the telecoms market.

Spain-based Telefonica turned in a respectable set of financials for 2008, with fourth quarter profit jumping 88 per cent year on year to Eur1.99bn and annual revenues up 2.7 per cent to Eur57.9bn, while fourth quarter revenues climbed 2.6 per cent year on year to Eur14.8bn.

The results won praise from analysts, with Michael Kovacocy, European telecoms analyst and sector strategist at Daiwa Securities noting that “Faith in Telefonica’s diversified business model and superior management execution has been rewarded with what we believe to be a very good set of results in the current macroeconomic environment.”

Meanwhile, German carrier Deutsche Telekom demonstrated its resilience to market forces, turning in financial results that beat expectations on both the top and bottom lines. Fourth quarter net loss improved from Eur750m in the last period of 2007 to Eur730m in 2008, while full year profits rocketed to Eur1.48bn, compared to Eur571m in 2007. Fourth quarter revenues jumped 2 per cent to Eur16.1bn, while full year revenues were down 1.4 per cent to Eur61.6bn, although there is some analyst concern about the carrier’s reliance on T-Mobile USA, which has been the company’s cash cow for some time now.

Take care

The Informer