Trade union slams BT restructuring plans

Trade union Prospect has hit out at BT’s drawn out plans to cut 13,000 staff as part of a restructuring plans to cut £1.5 billion a year from the spreadsheets.

Holding an open ballot to measure the reception of BT’s ‘People Framework’, the proposed organizational structure following the restructure, BT employees represented by Prospect have overwhelmingly rejected the proposal. 96.3% voted against the proposal.

While former CEO Gavin Patterson spent years forking out cash on various schemes, including rights for English Premier League and European Champions League football, his last actions were at the polar opposite end of the scale.

Announced in May 2018, the wide-ranging restructuring plan was to create a new BT business, one which is designed for the digital era. Alongside trimming the workforce by 13,000, the team would also overhaul its supply-chain and relocate from its central London HQ. BT claims many of the cuts would be sourced from back office and middle-management roles, supposedly protecting the workforce which will perform network maintenance and upgrades.

Over the last couple of days, new rumours have emerged out of the BT office suggesting new CEO Philip Jansen and his team are considering 25,000 cuts on top of the aforementioned redundancies. Should the rumours turn out to be true, BT’s workforce would be trimmed down to roughly 75,000.

In reaction to the original cuts, Prospect conducted an open ballot on BT’s ‘People Framework’, the new internal pay and grading structures. This framework is designed to create fewer management roles, each with more accountability, and de-layering the management organization.

“The rejection of the ballot by BT members gives a clear message to CEO Philip Jansen that he is not bringing his staff along with him in his future vision for BT,” said Prospect National Secretary Noel McClean.

“Good companies are built from the inside and organisational change on this scale is rarely successful when it is imposed on people. These changes will not just see the knowledge, skills and legacy of BT vastly reduced, but will severely impact local jobs and grassroots technology industries supporting local economies.”

While redundancies are certainly far from an ideal situation, BT does need to do something. The telco is currently bloated, representing one of the worst revenue returns per employee across Europe. These are the figures which shareholders would have been looking at when Jansen entered as CEO and you can guarantee he was given a mandate to improve this aspect of the business.

BT currently generates £254,200 per employee per annum, and though this compares to £275,900 at Orange, £327,100 at Telecom Italia, £350,800 at Deutsche Telekom and £405,300 at Telefonica. When you look at the value of assets per employee, the numbers are equally as unattractive. BT clearly needs to do something to alter these numbers.

Prospect has suggested the new system would create a less transparent pay review system to workers across all levels and divisions. It has also questioned whether the telco would be fit to serve the wider digital ambitions of the UK as a result.

Jansen might have been able to keep himself out of the media spotlight so far into his reign, but with his first earnings call only a couple of weeks away, the new CEO might well be called into the limelight to address this conflict. The initial announcement certainly attracted political attention, and we suspect this ballot might well do the same.

Ericsson calls BS on its full-stack BSS

Kit vendor Ericsson has started the year by writing down almost $700 million to account for the fact that its latest BSS efforts have turned out to be a non-starter.

Its Q4 numbers will feature costs of around SEK 6.1 billion related to the ‘reshaping’ of its BSS (Business Support System) business, half of which will be customer compensations and write-downs, and half of which will be restructuring charges. It looks like Ericsson has concluded this is the only way to get its struggling Digital Services division back on track.

“The company’s past BSS strategy included pursuing large transformation projects based on pre-integrated solutions, including development of a next generation BSS platform, the full-stack Revenue Manager,” said the announcement. “The strategy has not been successful and to date the full-stack Revenue Manager has not generated any revenues.

“The anticipated customer demand for a full-stack pre-integrated BSS solution has not materialized. Delays in product and feature development has also made the full-stack Revenue Manager less competitive. R&D resources in BSS have been focused on full-stack Revenue Manager, causing further delays in product releases of the established platform. In addition, certain complex transformation projects experienced delays and cost overruns.”

No revenues at all? Damn! You have to question the due diligence that ‘anticipated customer demand for a full-stack pre-integrated BSS solution,’ when none whatsoever materialised. Furthermore another SEK 1.5 billion will need to be accounted for over the course of this year, taking the total bill to around $860 billion. Ericsson does still see value in its established platform, Ericsson Digital BSS, which apparently has a decent installed base, so it’s not pulling out of BSS entirely.

A big part of Börje Ekholm’s strategy since he took over has been to dial back some of the over-reach that characterised the Vestberg era. “Ericsson is applying a selective approach to large transformation projects focusing on projects based on available products,” said the latest announcement, and it’s clear that Revenue Manager was just such a project. Ekholm deserves some credit for continuing to look facts in the face and take decisive action.

T-Systems joins the job-slashing brigade with 10k cuts

Deutsche Telekom is the next telco to axe employees, with its T-Systems division set to reduce its headcount by as much as 10,000, almost a quarter of employees.

According to Bloomberg, 10,000 jobs will be cut over the next three years, 6,000 of which will be in Germany, as the struggling unit redirects focus onto more lucrative segments such as cloud, cyber security and IoT. The headcount reduction is aimed at saving the telco roughly €600 million by 2021.

While job losses are never a pleasant topic of discussion, it is becoming much more common. BT hit headlines in recent months with plans to slim down the workforce by 13,000, while Vodafone decided to cut jobs but maintain executive bonuses and earlier this week, Telstra announced it was axing 8,000 as part of its Telstra2022 strategy.

In each of the above examples, the message has been simple; jobs from underperforming or soon to be redundant business units are being removed. There might be some additional hires as the telcos pivot to new areas, though the facts are plain; the telcos more jobs are being lost than created. This is another example of the times; telcos are generally not ready for the digital economy and restructuring initiatives to future-proof the business are something we should get used to.

At T-Systems, CEO Adel Al-Saleh seems to be living up to his reputation as a man who can turn around troubled business units. The T-Systems business has long been viewed as the problem child of the Deutsche Telekom family, consistently losing business to the likes of AWS and Microsoft who can offer faster and cheaper IT services through the cloud, and now the Al-Saleh effect seems to be coming into the equation. Having joined the business in January, Al-Saleh is now focusing on more profitable contracts, quality over quantity, as well as more lucrative ventures, such as cloud, cyber security and IoT. Such a shift in business priorities does not come without repercussions however.

Looking at the financials for the first quarter, total revenues at T-Systems declined 2.3% year-on-year to €1.704 billion, with EBITDA shrinking 40% to €57 million. It does seem DT has realised it cannot compete with the more agile cloud players, and has finished throwing good money after bad, instead focusing on areas where it can be more influential.

Elliott looks to chase Vivendi out of Italy

Vivendi’s influence over TIM despite not owning the company is remarkably strange and it seems activist hedge fund Elliott has finally had enough of it.

According to the FT, the hedge fund is looking to shake things up at TIM by trying to run Vivendi CEO Arnaud de Puyfontaine, who also acts as TIM’s Executive Chairman, as well as four other Vivendi ‘friendlies’ out of the board room. The showdown is set to take place during the annual general meeting next month, but Elliott is wasting no time in vocalising its distaste for the situation. The issue is a simple one; Elliott thinks the share price should be higher and it wants to make changes to ensure it does go upwards.

The last couple of months have been quite incredibly when it comes to the balance of power. Despite only owned 24% of the telco, Vivendi seems to be in an incredible position of power to influence activities at TIM, which did raise some voices of concern from the Italian government. Spinning off the fixed infrastructure business into an independent, but still wholly owned, business does seemed to have appeased the government, but Elliott is still standing defiantly.

Elliott has told TIM it wants to remove de Puyfontaine from his position, as well as four others who have strong links to the French media business. To replace the five, Elliott has put forward its own preferences, all of which have weighty reputations in the Italian business world. The suggested replacements are as follows: Fulvio Conti, Massimo Ferrari, Paola Giannotti De Ponti, Luigi Gubitosi, Dante Roscini and Rocco Sabelli.

This is of course not the first time Elliott has been hitting the headlines for making noise. In 2015 the hedge fund was incredibly vocal in trying to stop dodgy dealings regarding the acquisition of Samsung’s construction business by another part of the family for an incredibly low price. It might have failed to get its way in this example, but this is the only example of failure in the 50-odd activist campaigns it has launched over the last five years. Usually when Elliott starts making noise, people listen.

It isn’t tough to see why either. Elliott is regularly ranked in the top 10 hedge funds worldwide, with roughly $34 billion of assets under management. Its known for seeking out distressed organizations which are underperforming and helping formulate a turnaround. It has a rather unpleasant nickname of being a ‘vulture fund’, but it is generally successful at what it does.

And it does appear that the message has been received by Vivendi. The French media giant has released a statement in which it confirms it has heard the concerns and like Elliott has an interest in raising the share price of TIM. de Puyfontaine is even considering suspending his executive functions at TIM as a means to disarm the situation.

With the Vivendi push for power, the revolving door of executives, government involvement, spinning off of assets and now the intrusion of an activist shareholder, TIM is proving to be one of the most interesting companies in the telco space right now!