Massive Bell Canada layoffs could be “tip of the iceberg”

Cutting 2,500 management positions is just what Bell Canada needs to shet its image of a lumbering behemoth in a market now teeming with lean and agile competitors, technology analysts say.

The massive layoffs that Bell announced yesterday, they say, represent just the tip of the iceberg.

We could see more of the same as the telecom company, whose business is largely tied to its extensive landline network, moves to realign its operations towards the lucrative mobile market.

George Cope, the company’s newly installed CEO, announced Monday, that Bell would be eliminating no less than 2,500 jobs or nearly 15 per cent of its management workforce.

The announcement couldn’t have come at a more appropriate time, say Canadian telecom industry analysts.

“Cope’s announcement is precisely what Bell needs to get the message out that the company is prepared to reinvent itself,” according to Carmi Levy, senior vice-president, strategic consulting at Toronto-based AR Communications Inc.

“Bell continues to fight the perception that it is a bloated organization and less in touch with its customers than the competition.”

Recent events have contributed to this perception.

For instance, Bell was embroiled in a public relations fiasco, when Bell Mobility and Telus Mobility – another big player in the Canadian wireless space – announced they would soon start charging wireless subscribers 15 cents for incoming text messages.

At a time its image was taking a battering, Bell did get a modicum of positive publicity when it announced it would offer Samsung’s Instinct smartphone, which is considered a viable iPhone alternative.

Now the news of the management layoffs at Bell has evoked very different reactions from industry observers.

The restructuring, another Canadian analyst said, will herald a stream of short- and long-term changes.

“In the near future – that is before December – we could see the sale or outsourcing of smaller units and services…Three years out, Bell might even get out of the landline business,” said Troy Crandall, a Montreal-based telecom industry analyst for MacDougall, MacDougall & MacTier Inc., (also known as the 3 Macs), an independent investment firm.

The massive layoffs, which affect six per cent of Bell’s 44,000-employee workforce, is George Cope’s strategy to whip the flagging telecom giant into shape, a Bell spokesperson suggested.

It is part of Cope’s “100-day campaign to align the company,” said Pierre Leclerc, director of media relations for Bell in Montreal.

He said the move would trim down the company’s management ranks from 11 layers to a maximum of eight.

The job cuts include the 30 per cent reduction in executive jobs announced earlier this month. Together they will help Bell save around $300 million in annual salary costs.

That money – plus the $900 million saved from suspending dividend payments to shareholders – will be used to back upcoming investments and reduce the company’s nearly $32 billion debt.

Earlier this month Bell Canada announced it renegotiated its deal to sell itself to a consortium of investors – led by the Ontario Teachers Pension Plan Board (OTPPB) and several U.S. partners – for about $50 billion. The buyout – the largest in history – is expected to close in December.

Meanwhile CEO George Cope emphasizes that the reasons for the management layoffs at Bell go “beyond money.”

“This is about making sure our decisions are made quicker, our pace picks up in the competitive marketplace we’re in, and that all management is closer to the customer than we were just yesterday in terms of this new structure.”

This “competitive” marketplace now includes at least five new players poised to break into the mobile phone field after being awarded broadband access in the Federal government’s wireless spectrum auction that concluded this month.

Taking on the “big three” (Bell, Rogers Communication and Telus Corp.) are: Globalive Communications Inc. of Toronto; Quebecor Inc. of Montreal; Shaw Communications Inc. of Calgary; Bragg Communications Inc. of Halifax; and Data&Audio Visual Enterprise (DAVE) of Toronto.

The rapidly shifting mobile landscape is a big factor in Cope’s decision, reckons Levy of AR Communications.

The arena has become more complex over the years and Bell has been losing a significant number of landline customers for every wireless subscriber that signs up with it or other providers. “The longer Bell maintains the status quo, the worse shape it will be to compete,” Levy said.

Other telecom incumbents are not hampered by an extensive legacy landline, or such a large workforce as Bell.

Levy said Bell will eventually have to cut loose its landline operations. “Landline is a business that has no future. If Bell doesn’t say goodbye to it, subscribers will eventually say goodbye to Bell.”

Before December, when the OTPPB officially gains majority control of Bell, Cope is likely to announce a few more changes, said Crandall of the 3Macs.

This, he said, could involve the reorganization of the company into smaller Bell units.

In the long term, this reorganization could extend to the company’s satellite TV unit ExpressVu and Bell Aliant.

ExpressVu has been heavily losing money.

Bell might decide to sell off the company over the next three years or relegate it to a rural service as it develops an IPTV service of its own, which the telecom firm can offer initially to urban subscribers, Crandall said.

Developing an Internet-based TV service offering is crucial as Bell remains the only Canadian player unable to provide the service.

Bell also has the option of either selling off its 43 per cent stake in the Atlantic Canada telecom firm Bell Aliant or buying out the company.

Opting for the latter will grant Bell greater control of and full access to profits of Bell Aliant, which corners the Internet access market in Atlantic Canada, plus a substantial landline business in the region and parts of rural Ontario and Quebec.

Down the line, Crandall also foresees Bell partnering with Telus to develop a GSM network as it plays catch up with Rogers, currently the country’s sole GSM network owner.

GSM or global system for mobile is a popular standard for mobile phones. Its GSM network made Rogers Apple’s singular choice to handle the Canadian launch of the iPhone 3G.

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