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These Telco Job Cuts Are a Bad Sign for Europe

Alex Webb
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These Telco Job Cuts Are a Bad Sign for Europe

(Bloomberg Opinion) -- In Flemish, they call it a “Graadmeter.” In English, it’s a bellwether.

Either way, it’s applicable to the layoffs announced today by Proximus SA. The former Belgian telecom monopoly is cutting about 6 percent of its workforce as it accelerates the “digitalization” of its business (though its statement does little to explain exactly what that means).

Erstwhile national carriers almost uniformly have a cost disadvantage to their privately founded peers, namely that they employ significantly more people. So while Proximus generates 433,276 euros ($500,000) in sales per employee, its two Belgian rivals generate an average of 820,934 euros. The discrepancy is even more extreme when it comes to profit per employee. Liberty Global Plc-controlled Telenet Group Holding NV gets more than three times as much Ebitda on that basis as Proximus.

Yet benchmarked against the rest of Europe, Proximus compares very favorably. Just a handful of former national carriers generate more revenue per employee. Of course, the fact that Belgium has three rather than four operators gives it a little more power over pricing. That gives it an inherent advantage compared to the likes of BT Group Plc, for instance, which has to compete against three other major players in the U.K.

But Germany also has just three operators, and Deutsche Telekom AG’s revenue per employee is some 20 percent less than that of Proximus, even though prices are higher. The government is the biggest shareholder in both companies, rendering job cuts even harder.

Which all suggests that Proximus has a decent track record at effectively reducing headcount to meet market demands. Usually, former national carriers do so through attrition – not replacing those who retire or leave for other roles elsewhere. Their political prominence makes it hard to do much else, even as technological advances are making it easier to automate many processes.

The absolute number of net job losses at Proximus of 750 employees still represents a significant chunk of the 12,400 total headcount. It’s a similar proportion to the cuts that BT, with its 105,400 staff, announced in May. But I wouldn’t be surprised if industry executives around the region look at the measures taken by the likes of Proximus and wonder if they can do more. Vodafone Group Plc has already started job cuts in Spain. It’s an inauspicious time to work in telecommunications.

To contact the author of this story: Alex Webb at awebb25@bloomberg.net

To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

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