Telefonica, Portugal Telecom to Eliminate 16,500 Jobs, 24 June 2003

June 24 (Bloomberg)—Telefonica SA and Portugal Telecom SGPS SA, the largest telephone companies on the Iberian peninsula, will cut 16,500 jobs to reduce costs amid increased competition.

Telefonica, based in Madrid, will cut 15,000 jobs in Spain through 2007, it said in a statement sent to regulators. Portugal Telecom is eliminating 1,500 jobs this year at its traditional phone unit, it said in a presentation to investors in Lisbon.

Telefonica Chairman Cesar Alierta and Portugal Telecom Chief Executive Miguel Horta e Costa follow rivals who are cutting jobs to counter growing competition and sluggish growth at home. France Telecom SA plans to eliminate 13,000 positions this year and Deutsche Telekom AG is cutting 55,000 jobs through 2005.

“The traditional fixed-line business is now a commodity and the only way to boost profit is through improving efficiencies,” said Juan Jose Figares, chief analyst at Link Securities.

The stock of Telefonica fell 5 cents to 10.14 euros. Portugal Telecom shares fell 15 cents, or 2.3 percent, to 6.30 euros.

The two companies have lost at least a 10th of their domestic traditional telephone markets, analysts said. The increased competition has eroded revenue.

Telefonica's group sales per employee fell 3 percent to about 186,000 euros ($213,700) last year, the first decline in at least four years, according to Bloomberg data. Portugal Telecom's sales per worker fell a second straight year in 2002 to about 242,000 euros.

Rivals Improve

European rivals such as Deutsche Telekom AG, Telecom Italia SpA and Royal KPN NV boosted sales per worker last year.

“It's good that they are reducing personnel that is not adding value,” said Luis Benguerel, who helps manage the equivalent of $41 million at Interbrokers and owns Telefonica shares. ``The key is whether they are attracting new talent to help fend off competition.”

Telefonica said it will present a plan today to unions of its domestic unit Telefonica de Espana SA to cut 15,000 jobs in five years. The company has already cut more than 25,000 jobs, at a cost of about 6.4 billion euros, it said in a press release e-mailed to the press.

The Spanish former monopoly's domestic unit had 40,659 workers in December, about a fourth of the company's total workforce. The biggest unit is Atento, a call-center business, with about 49,000 workers at the end of last year. The traditional- phone businesses in Latin America have about 25,600 workers.

Portugal Cuts

Portugal Telecom plans to end the year with 8,800 workers at its fixed-line unit, down from about 10,300 last year, it said in a presentation sent to regulators. The company trimmed 425 jobs at the division in the first quarter, the presentation said. Last year the Portuguese group had more than 23,100 employees.

The job cuts are expected to produce annual savings of about 45 million euros, Portugal Telecom said.

Telefonica de Espana's revenue was little changed at 10.27 billion euros in 2002, generating about a third of the group's revenue. Profit at the unit fell by a fourth to 808 million euros.

PT Comunicacoes, the Portugal Telecom unit that provides traditional phone service, had an 8.4 percent drop in earnings before interest, taxes, depreciation and amortization last year, as its revenue fell 9.2 percent. The trend continued in the first quarter, with a 7.2 percent drop in revenue.