Manitoba Telecom Services (MTS) means to shed 85 people from the payroll by the end of the year, with the firm citing poor growth and unfriendly regulations as the main reasons for the move. Industry analysts, meanwhile, say the cuts indicate the state of Canada’s telecom market.
In a Nov. 18 press release, MTS said it must 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 a 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 decision by the Canadian Radio-television and Telecommunications Commission (CRTC) 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.
Elroy Jopling, Toronto-based principal analyst at Gartner Inc., said MTS’s move wouldn’t affect enterprises operating in Manitoba.
Brownlee Thomas, a Montreal-based analyst at Forrester Research Inc., said it’s no surprise that MTS is in pruning mode.
“That looks like…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 tumultuous telecom industry, which 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.”
Jopling said MTS’s cuts are exemplary.
“A lot of the carriers are positive; they see light at the end of the tunnel. But at the same time, they haven’t seen revenue increases. It’s not surprising to see cuts. And you’ll probably see selective cuts for the next little while.”
