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Fri 6 Oct 2006 08:00 PM

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Gartner: telcos may cut jobs to compete

Increasing competition could drive telcos in the region to cut jobs to make up for falling revenue, according to a leading Gartner analyst.

Leif-Olaf Wallin, research vice president specialising in enterprise mobility at Gartner, said he believed that job cuts could be the only way for telcos to survive as deregulation and new competition in the market drove down the cost of phone calls.

Speaking to IT Weekly at the firm’s Mobility event in Dubai last month, he said the region could mirror the situation in other parts of the world, such as Europe or the US, where mobile operators had plans to reduce their workforce by an average of five to 10%.

“The problem is that the voice revenue will keep on declining even though the usage will increase,” said Wallin. “The overall revenue is going down so most operators need to find new services to deliver over their network or they need to cut costs quicker than the revenue decline of voice.”

“And in this region we believe that operators will be challenged to cut costs that aggressively,” he said. While firms could look at other methods of reducing their operating costs “the biggest driver is people,” Wallin claimed. “It means losing people, it means firing people, reducing costs.”

Wallin believed that the first strategy to be adopted by operators would be to introduce new value-added services, for example by selling data content over the network. “They could generate more revenue by selling additional services — the most obvious is selling content — that could be games or could be religious content,” he said.

“But unless they are successful in increasing revenue and sustaining innovation, at some point in time they will have to resort to cutting costs. And that typically translates to workforce reduction,” he claimed.

However, Mark Rotter, programme manager for telecoms in the Europe, Middle East and Africa (EMEA) region at IDC did not agree that telcos would be forced to cut their workforces.

“I think that’s a very long stretch — I wouldn’t go that far at all,” he stated. “I think that operators are typically really good at figuring out the long-term pain points and cost-benefits and so on.”

“As a typical consumer user, one is not yet exposed to how vendors and operators are planning this. But as an analyst we’re exposed to some of the conceptual thinking of how they are planning to make that up,” he added.

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