UPDATE: MTS axes employees

Manitoba Telecom Services (MTS) means to shed 85 people from its payroll by the end of the year, saying poor growth and unfriendly regulations are to blame.

In statement issued Tuesday, MTS said it has to align human resources with business realities. The company is cutting 85 people via voluntary measures, where possible, from its e-business subsidiary Qunara Inc. and its telecom service provider arm, MTS Communications.

“The company is faced with lower growth and must adjust its operations in order to remain a leader in the marketplace,” MTS said in the statement.

“Growth in the telecom industry as a whole is still not matching levels seen in prior years. In addition, regulatory decisions which continue to limit MTS’s ability to adjust prices while mandating greater discounts to competitors and imposing productivity gains have made these reductions a necessary step.”

Incumbent local exchange carriers (ILECs) like MTS and Bell Canada have complained about regulatory decisions that they say hurt their bottom lines. Most recently Bell appealed a Canadian Radio-television and Telecommunications Commission (CRTC) decision that requested the telco fork over information about certain customer contracts. Bell said the order could expose sensitive customer info to its competitors, and to its customers’ competitors as well.

Earlier this year the CRTC said it would investigate price-floor safeguards, which limit how low an ILEC can go on prices. Incumbents said price-floor safeguards impact their competitiveness. And the most recent regulatory change surrounding the relationship between competitive local exchange carriers (CLECs) like Call-Net Enterprises Inc. and incumbents coughed up cost savings for the former group, while cutting into ILECs’ revenues.

MTS said it’s also consolidating its call centres located in Thompson and Dauphin with those in Brandon and Winnipeg. The firm didn’t specify how many call centre staffers would lose their positions as a result of the move, but MTS did say affected employees would be given the opportunity to move to Brandon or Winnipeg, or take a severance package.

Brownlee Thomas, a Montreal-based analyst at Forrester Research Inc., said it’s no surprise that MTS is pruning the payroll.

“That looks like a streamlining, the usual pre-Christmas layoff. These things usually happen after the third quarter results are in and mid-way through the fourth quarter.”

Thomas said the cuts also represent aftershocks stemming from a raucous telecom industry, which has soared and crashed in the space of five years.

“I think we’re seeing a turnaround, but the Canadian industry lags the U.S. in terms of recovery because it’s a smaller market….It wasn’t hit as hard as the American telecom marketplace, because we didn’t encounter scandals and so on. We’ve seen the restructuring of Allstream; we’ve seen the restructuring of Sprint Canada short of bankruptcy protection. We have market stabilization that will include rationalization of operations.”

Still, Thomas added, MTS’s troubles are not indicative of serious future troubles for the telecom sector.

“It does suggest that the telecom market has not quite reached bottom. But I think it’s fair to assume that if it hasn’t hit the bottom, we’re very close to the bottom, and we shouldn’t anticipate major cuts.”

MTS said 90 per cent of the reductions it’s had to make since 1991 have occurred on a voluntary basis.

“While no one likes the prospect of having to reduce their workforce, we need to take the proper action now so we can continue to offer our customers high quality service at competitive prices,” said Bill Fraser, MTS’s CEO, in a statement.