BT will not be alone in making massive job cuts – analysts

  • UK national telco is cutting up to 42% of its labour force during the next six or so years
  • Greater automation and digitisation means fewer staff will be needed in the future
  • Expect similar moves by other telcos around the world, say analysts
  • A mix of financial malaise and technology advances will result in industry-wide job cuts

It shouldn’t be a surprise to anyone in the telecom industry that network operators are cutting jobs as they automate their day-to-day processes, but when a Tier 1 telco announces that its workforce is set to be cut by as much as 42% between now and the end of the decade, the reality of the situation kicks in – and industry analysts expect such announcements will be the norm rather than the exception.

BT has announced that its labour force, including contractors, will be reduced by as much as 55,000 from the current level of 130,000 between now and 2030: Some of those roles are set to be axed as major network rollout programmes come to an end and construction contractors are no longer required, but many others will go because current manual processes, whether in network planning and traffic management or customer case, will become automated either partially or entirely – see BT to cut up to 55,000 jobs in AI-enabled efficiency drive

The announcement, as part of BT’s financial year results, comes only two days after Vodafone announced it plans to cut 11,000 jobs over the next three years in an effort to become leaner and more efficient – see Vodafone CEO axes 11,000 jobs, says performance is “not good enough”.

The numbers are large and will have a major impact on the companies and the industry, but it’s part of an ongoing headcount reduction trend that is set to become more pronounced and increasingly linked to AI-enabled automation processes that, after years of development, testing and initial deployments, are now having a real impact on telco operations at a time when it is becoming increasingly hard for communications service providers to turn a profit. 

IDC’s worldwide telecom services research director, Kresimir Alic, said BT’s news is “not a surprise – not at all”. “This is just a continuation of a process that started 20 years ago,” he added, pointing out that Deutsche Telekom had 251,000 employees in 2003 and fewer than 207,000 last year, while T-Hrvatski Telekom in Croatia had 10,000 staff in 2002 and now has fewer than 5,000. 

“The difference [now] is why this is happening. Twenty years ago, incumbent telcos were outsourcing non-telco activities [in order] to focus on their core business – today it is due to increased efficiencies from automation and digitisation,” noted Alic, who believes telcos all over the world will take similar actions to those announced by BT today. 

CCS Insight director of consumer and connectivity, Kester Mann, noted that the “greater use of automation thanks to artificial intelligence will account for many” of the job cuts at BT “as fewer people will be needed to serve customers.”

And he also expects to see similar moves by other operators around the world as automation and smarter and more efficient networks become the norm. “It’s hard not to see this happening industry wide. Telcos have been painfully slow to transition to more nimble organisations and amid continued uncertainty over future revenue generation, this feels like the best way forward for them all,” added Mann. 

PP Foresight analyst Paolo Pescatore feels that job cuts in the telecom sector “are becoming the norm… We’ve seen a correction in workforces across all sectors, most notably in big tech. We are now starting to see this in other verticals. Telecom is not immune, and significant technological developments will further fuel job cuts,” noted the analyst.  

And for Dario Talmesio, research director of service provider strategy and regulation at research house Omdia, there are multiple factors that will lead to ongoing industry-wide headcount reductions at the network operators. 

“There is more to unpack regarding these headcount reductions,” he said, adding there are major financial pressures for the telcos to deal with as well as the impact of automation and digitisation. 

“After a timid injection of positivity in 2021, which we can call a pandemic revenue boost, the industry has returned to its familiar level of gradual decline in mature markets,” noted the analyst. “The headcount reductions are mainly because many telcos have an unsustainable long-term business. There is a significant focus on reducing operating costs, but much more needs addressing. In 2022, the telecom industry managed to reduce its operating costs by 3.4%” but that “does not even match the revenue reduction” which, on average across the world’s 40 largest telecom operators, came in at a worrying 5.8%. 

“Of course, automation, digitisation and sharing are ways in which any company in any industry is trying to address the issue” of operating costs (opex), which are crippling the network operators. “The telecom industry opex is about 68% of revenues, which is too high for a sector that is also capital intensive,” noted Talmesio. 

And there’s another factor at play in Europe, added the analyst. “Let’s remember that, currently, there is an intense Europe-wide negotiation about the contribution to network costs” by the so-called big tech companies. Many of Europe’s major telcos want the major cloud and streaming companies to contribute towards their network costs in what is now generally referred to as the ‘fair share’ debate – see Big tech slams European Commission as capex consultation begins.

 “While these headcount reductions are needed, there is also a message to governments, and it’s a loud message,” said Talmesio. The telcos are saying “we are large employers and large taxpayers –  see what happens if we don’t make enough money from our networks?" noted the analyst. 

- Ray Le Maistre, Editorial Director, TelecomTV