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NTL confirmed on Tuesday that it plans to cut 6,000 jobs following its merger with rival cable operator Telewest as it seeks to reduce costs.
Steve Burch, chief executive, revealed that about half of the jobs would be outsourced and that 80 per cent of the reductions would happen in the next twelve months.
The cable group that operates in the UK but is listed in New York announced the job cuts as it released first-quarter results that showed a pre-tax loss that more than doubled to £121.5m ($225m) on revenues that rose £127m to £611m as a result of the merger. However, the group recorded a small operating profit of £3.9m.
“Today, we are announcing plans to accelerate our integration programme to achieve a run rate of at least £250m of annualised cost synergies by the end of 2007,” said Mr Burch. “Part of this process will involve outsourcing a significant number of jobs…as well as actual job reductions.”
“The cost savings from the outsourcing and the job losses combined will be equivalent to around 3,400 full-time equivalent employees,” he added.
Over the past year NTL and Telewest have been gradually outsourcing technical jobs in order to reduce staff numbers in preparation for the merger.
“Once again British workers have first heard about job cuts through the media,” said Sharon Elliott from Bectu, the media union. “The company’s apparent decision to outsource its call centre operations sends a strong message to staff and customers that quality customer service is dispensable.”
“The job cuts are typical of a business that is struggling to integrate acquired assets quickly,” said Paul MacGregor, UK head of project management consultancy PIPC. “NTL is desperate to take cost out of its recent mergers and slashing the headcount and outsourcing its support is an obvious short term solution. The fear is that an already struggling customer service record – NTL is one of three ISPs criticised by a YouGov survey for poor service - could deteriorate further and push more customers away.”
In April, NTL announced plans to acquire Virgin Mobile as it plans to offer customers a “quadruple play” of services - fixed line and mobile telephony, internet and television. Such additional services are likely to help reduce customer “churn” amid intensifying competition in the broadband market and the gradual decline in fixed line telephone usage.
As part of the acquisition of Virgin, NTL signed a 30-year agreement to use the Virgin brand. Mr Burch said on Tuesday that the group would re-brand as Virgin early next year.