Communications provider Teleglobe Inc. Thursday announced it will lay off 20 per cent of its employees worldwide, approximately 170 of them from its Montreal office.
The company is headquartered in Reston, Va., but more than 90 per cent of its workforce operates out of Montreal. The cuts will be made in administrative positions like finance and human resources, leaving sales, marketing, IP operations and engineering intact. Teleglobe requires those staffing levels remain consistent — and may eventually be increased by 50 to 100 — if it is to go ahead as planned with its 110-city global IP network, called GlobeSystem.
During a teleconference Thursday morning CEO Terry Jarman attributed the cuts to a weakening global economy and poor market, in particular for telecommunications companies. “Growth rates projected just six to eight months ago have simply not materialized,” said Jarman. “The demand for data services especially is not growing at the rate predicted before this economic downturn. We have been adjusting our investment plans over the last two quarters to adapt to this emerging reality.”
It’s a familiar story for communications players, said Yankee Group of Canada analyst Iain Grant. “The world has changed, forecasts aren’t going to be met, the belt tightens. . . . I think they want to put the company on a firm foundation, if nothing else to make them look more attractive (to investors).”
Competitor 360 Networks bowed out of the teleco race completely when it filed for bankruptcy in June. “(360) was ostensibly going after similar markets that Teleglobe was going after and their collapse would presumably have led Teleglobe to have higher sales. I guess it wasn’t enough,” said Grant.
Teleglobe expects to save US$50 million annually, starting next year, as a result of the cuts and some adjustments to its GlobeSystem plans. The company will still serve its 110 cities, said Jarman, but there will be fewer dedicated data centres. Co-location opportunities in an estimated 40 cities will be explored with potential regional partners. “It’s purely a function, at this point in time, of how much volume of business we see being generated from that city and that region,” said Jarman.
Teleglobe’s restructuring plan will see the sticker price for GlobeSystem drop from US$3.4 billion to US$2.9 billion. US$900 million of that will come through an equity investment from parent BCE Inc., US$1.25 billion from lines of credit, and some of the remainder may be made up through a private debt placement in Teleglobe.