BellSouth, the third largest US telecommunications group, plans to cut its management ranks by 1,500 people and will take a $95m after tax charge to cover the costs. About $50m of the charge will be recognised in the current quarter.
The move is the latest sign of the tough market conditions and new competition facing the traditional fixed line telecommunications groups as subscribers switch to wireless carriers and defect to lower-cost cable Internet telephony or VoIP (Voice over Internet protocol) providers.
“Reducing workforce is the toughest business decision a company has to make,” said Duane Ackerman, BellSouth’s chief executive. “We have worked hard to avoid it, but many companies our size and particularly our competitors operate with lower overhead and fewer management layers.”
The Atlanta-based company said the job cuts will come in supervisory and non- supervisory management positions, including staff support functions. Most of the reductions are expected to occur through the acceptance of voluntary severance packages and are due to be completed by the end of April.
BellSouth said the reductions were part of a continuing effort, “ to better position the company for success in the competitive broadband marketplace” where the established telecommunications firm face new competition from cable TV companies, VoIP servive providers and increasingly in some cities, from WiFI startups.
All the big US telecommunications groups have undertaken substantial restructuring and job cuts over the past few years. Like its counterparts, BellSouth has also sought to offset fixed line losses by investing in other higher growth areas including wireless and broadband Internet service.
However BellSouth, which also holds a 40 per cent stake in Cingular Wireless, the nation’s largest wireless voice and data provider with 52.3m customers. has been somewhat less aggressive that either AT&T (formerly SBC Communications) or Verizon Communications which are both investing heavily in new fibre optic based networks that will enable them to compete head-on with cable companies and deliver a wide range of TV and advanced video services.