Call it ‘downsizing.’ Call it ‘restructuring.’ Teleglobe Inc. even dropped a new word into business lexicon by calling it ‘revectoring.’
No matter how you slice it, the Quebec-based telecommunications provider (a unit of BCE Inc.) announced August 30 that it will cut 20 per cent of its workforce and slash US$500 million from its capital spending budget through 2003.
The loss of 450 positions will primarily affect Teleglobe’s Montreal and Reston, Va.-based operations. A total of 170 jobs will be trimmed from the Montreal facility and Teleglobe said most of the losses will be in
the areas of voice communications, network planning and administration. The company expects to save US$50 million annually from the move.
During a conference call, Teleglobe chief executive officer Terry Jarman cited slowing telecommunication traffic rates for the cuts. “Teleglobe, like its peers around the world, is being adversely affected by the weakening economy. The demand for data services is not growing at the rate predicted,” Jarman said.
“Today’s actions will allow us to reduce costs and weather the downturn in the industry, while at the same time continuing our strategy to position for the future. We’re planning on a soft market for the next 12 months or so, hence our adjustment.”
The announcement marks the second time this year that Teleglobe has revised its capital spending plan. Last April, the estimated US$5 billion forecast through 2003 was adjusted to US$3.4 billion.
Teleglobe’s ambitious GlobeSystem fibre optic network – a plan to build facilities in all of its 110 worldwide locations – is on hold, Jarman said. Teleglobe will instead rent facilities at selected locations, saving the company an additional US$350 million by 2003.
Despite the news, Teleglobe customers should not see a decline in service, according to telecom analyst Lawrence Surtees at IDC Canada in Toronto. Now that Teleglobe is under the BCE umbrella, Surtees noted, the cuts will mostly affect overlapping head office and administration functions.
The current surplus fibre supply has allowed Teleglobe to further curtail expenditure, noted Surtees, and it’s still ‘business as usual’ with respect to service.
“I don’t think at the end of the day it’s going to affect service. As for the US$500 million dollars trimming to the GlobeSystem project. . .so they’re cutting back a few data centres in another parts of the world. They can simply rent some space in existing telecom hotels, which makes sense,” Surtees said.
The cuts are strictly related to the economic slowdown and service should not be affected, said Teleglobe spokesman Jean-Charles Robillard.
Jarman added that the cuts do not place Teleglobe’s future in jeopardy, nor does he anticipate more job losses down the road.
“We have not made any cuts of any significance in our sales or marketing or Internet protocol operations, because we believe that is the next step in Teleglobe’s evolution,” Jarman said.