Telia cuts 3,000 jobs as it intros new operating model

• Telia is revamping the way it works across its five European markets
• The ‘change programme’ will result in the loss of 3,000 jobs, about 15% of the total workforce, this year
• Swedish telco says decision has been taken ‘to ensure long-term success’
• The cuts will reduce Telia’s group operating costs by $252m

Swedish telco Telia is planning to cut 3,000 jobs, just over 15% of its group headcount, as part of a restructuring process that, it claims, will strengthen and provide greater customer focus in the five European countries in which it operates. 

Telia ended last year with about 18,000 full-time staff and 1,370 contractors (or “resource consultants” as it calls them), giving it a total on 31 December 2023 of 19,370 “positions”. So far this year, the operator has already reduced that number by 455, while a further 2,545 will be cut by the end of the year (subject to union negotiations). 

Each of the five countries in which Telia has commercial operations are set to be affected, as the table below shows. 

According to Telia, the restructuring process will cost 1.4bn Swedish krona (SEK) ($136m) – with those charges hitting the operator’s balance sheet during the second half of this year – and result in annual operating cost savings of “at least” SEK2.6bn ($252m). 

The operator stressed that the move is about maximising efficiency, simplifying operations and positioning the company to be more customer oriented, implying that it is not implementing the “change programme” because it is in any financial difficulties (more on that later). 

Telia noted in its announcement about the job cuts that it “already holds strong positions in its markets” but has identified “opportunities to further increase its efficiency and simplify its structure to become faster in decision-making and commercial execution, and with a focus on ensuring its workforce is increasingly engaged, accountable and empowered to create impact.” 

It plans to “streamline and reshape its organisational structure to equip its country units with additional capabilities transferred from the current Common Products & Services (CPS) and Group Strategy & Commercial (GSC) organisations. By decentralising and moving part of the competence from common to country units, the latter will be able to better serve customers and capture growth based on local market needs, while reducing overlaps and simplifying interfaces in day-to-day operations.”

Not everything is being decentralised, though. “After the intended transfer of competence to country units, the remaining part of the common technology and product unit would retain expertise in IT, networks and product management, allowing Telia to continue to benefit from economies of scale where relevant,” the operator noted. 

CEO Patrik Hofbauer, who took over from Allison Kirkby (now CEO at the UK’s BT Group) in February this year, stated: “This is a tough decision, but one that is necessary to ensure the long-term success of Telia. Together with the board and my leadership team, we are set to eliminate barriers to execution and reduce layers of organisational complexity so that we can better serve our customers. I envisage that this intended approach will not only result in a Telia that is simpler and faster in decision-making and commercial execution but [will] also help us to grow our business and generate enough cash so that we can make necessary investments and cover our dividend, as we remain committed to our dividend policy. While we will support the employees who will eventually leave Telia, we will also make this company a better place to work for those employees who remain with us.”

The efficiency programme is not only having an impact Telia’s workforce but is putting pressure on Telia’s technology suppliers, as the operator is also reducing its vendor financing commitments by 50% from its 2023 level of SEK11.5bn ($1.12bn), a move that will bring the company more in line with “wider industry levels”, according to Telia. 

So, how is Telia doing?

In July, Telia reported a 2.3% year-on-year increase in second-quarter revenues to SEK22.4bn ($2.17bn), driven by a 2.5% increase in service revenues to SEK19.4bn ($1.88bn), while its operating income was up by just over 40% to SEK2.94bn ($285m). For the full year, Telia expects it service revenues to increase by low single digits, so roughly in line with second-quarter performance, and its TV and media operations that had been dragging down profitability in recent years have now been restructured and are experiencing improving sales and margins, so the operator appears to be in a stable financial position overall.   

Telia’s share price was, perhaps surprisingly, not noticeably impacted by the announcement – news of cost cutting usually results in a share price increase but Telia’s stock is slightly down, by just 0.5%, to SEK32.47. However, the company had suggested earlier in the summer that a restructuring process was on the way, with the CEO noting in its second-quarter earnings report commentary that there was a need to “improve operational efficiency and execution speed, and we see opportunities to do so through simplification and streamlining of the business.”  

It should be noted, though, that the company’s share price is up by 26% this calendar year, so investors are generally happy with the direction that Hofbauer and his team are taking. 

- Ray Le Maistre, Editorial Director, TelecomTV