Forthcoming mass redundancies at Tele Danmark: the Danish telecom sector in transformation

Liberalisation, increased competition and the introduction of new technologies have forced the Danish telecom operator - Tele Danmark- to reduce its staff by 2,500 employees. Widespread strikes, involving some 7,000 employees, followed the announcement on 29 January 1997. Employees and trade unions have criticised the passive role of the state and the behaviour of Tele Danmark. After 15 days of conflict, Tele Danmark agreed to negotiate a retraining package for its employees, put forward by the telecom workers' union. The next negotiating meeting was due to take place on 12 March 1997.

On 29 January 1997, Tele Danmark informed its employees of its decision to reduce staff by 2,500 and take on 500 new employees. The decision, which was due to come into effect by mid-1998, is part of an efficiency plan, which will cut annual costs by DKK 600 million and implement major organisational changes.

The long-awaited dismissals in Tele Danmark are an attempt to adjust a former state monopoly to a telecommunications market which is characterised by increased liberalisation and competition; hence the need to introduce new technologies. Tele Danmark was founded in 1990 as a semi-privatised telecom operator, with the Danish Government holding 51% of the shares. Decisions on future state involvement must await new telecom legislation in June 1997.

Competition within the telecom sector increased in 1995, as a consequence of the decision by the EU Council of Ministers, in June 1993 and November 1994, to liberalise the EU telecom sector. Before the liberalisation in November 1994, 33% of Tele Danmark's revenues came from business activities subject to competition. In early 1995 the figure was 92%. According to the newspaper, Jyllandsposten, a note presented to the board of directors, prior to the decision to dismiss 2,500 employees, showed that Tele Danmark's average growth performance was lower than its competitors. However, a survey conducted by the newspaper, Berlingske Tidende, on 7 February 1997 questioned whether Tele Danmark's performance was really as poor as had been suggested. The company refused to comment on the findings of the survey.

Widespread strikes and the role of the state

Although employees were expecting staff reductions, the decision came as a shock, resulting in widespread strikes. Nearly half of the 16,000 employees at Tele Danmark were involved, according to the company. The radical changes in telecoms - as well as in the postal, banking and shipping sectors - could inflate the number of industrial disputes in 1997, following 1996, when the number of strikes in Denmark was 70% lower than the year before.

Employees and unions criticised the passive role of the state and the failure on the part of Tele Danmark to introduce a retraining and redeployment programme. Employees came out strongly against what they saw as the passive role of the Government, calling on the Minister of Research and Information Technology to intervene on the employees' behalf. However, the Minister, Jytte Hilden, refused to intervene, stating that the Government expected Tele Danmark to adapt to market pressures without any kind of political intervention. She called the proposals at Tele Danmark necessary, but deplorable. She was confident that management would implement the changes according to the rules governing the Danish industrial relations; thus she expected that employee representatives would be constructively involved in the forthcoming negotiations.

Hans Jensen, the president of the Danish Confederation of Trade Unions (LO), called it "madness" that the Government, as a major shareholder, should accept such massive redundancies when the Government itself had to finance the payment of unemployment benefit to the redundant employees. The Danish Government is a major contributor to the unemployment insurance funds.

Retraining and older workers policy

Shop stewards criticised management for not retraining and redeploying existing employees, rather than recruiting new employees to take their place. They suspect that management is simply executing a strategy aimed at reducing the number of older and part-time employees, and recruiting young, well-educated employees. Tele Danmark refutes this criticism, pointing to a press release issued on 4 February 1997 in which management stated that it had undertaken 40,000 retraining courses annually. In 1995, the average age of an employee at Tele Danmark was 42, with an average length of service of 16 years.

The vice-chair of the parliamentary labour market committee, Aage Frandsen from the Socialist Peoples' Party (SF) demanded that Jytte Hilden should investigate the exact content of the 40,000 courses and what efforts had been made to retrain the employees concerned. However, Tele Danmark refused to release the requested information because of its confidential nature.

Hans Jensen, the president of LO, strongly criticised the management of Tele Danmark; in a statement to the Danish newspaper Politiken, he maintained that only a company with a poor training record would deem it necessary to dismiss employees while recruiting new employees at the same time. This, he stated, was a clear-cut example of how not to run a modern company.

The Danish Union of Telecommunication Workers (TKF), with 13,000 members, demanded that:

  • any redundancies should take place through voluntary arrangements;
  • the 500 new positions should be filled by retraining and redeploying existing employees;
  • ele Danmark should work out a training and education plan for each employee; and
  • the company should formulate a company policy for older employees.

After 15 days of conflict, an extraordinary meeting between management and TKF on 13 February 1997 produced a form of agreement. Tele Danmark agreed to further talks on the proposal on increased retraining for employees which had been put forward by TKF. After the meeting the president of TKF, Bo Stenør Larsen, made a statement to the newspaper, Aktuelt that he was not too optimistic, but he did point out that management had the will to negotiate. The next meeting was due to take place on 12 March 1997.

The question of companies' training policies and the need to formulate policies for older employees now feature at the top of the political agenda in Denmark. At a high-level conference on 28 November 1996, the Prime Minister, Poul Nyrup Rasmussen, emphasised the importance of maintaining older employees in the labour force, and called for the social partners to incorporate such initiatives into collective agreements. The context is demographic change and the increasing number of workers withdrawing from the labour market at an early age.

In March 1997, the Ministry of Labour was due to launch a four-month national campaign on retraining and planning, targeting 17,000 companies. The primary objective is to enhance the awareness of the need to perceive retraining and planning as a natural part of working life. Both the Danish Employers' Confederation (DA) and LO have given their support to the campaign. Surveys show that 60% of Danish companies do carry out planning on retraining their employees.

Commentary

The forthcoming redundancies at Tele Danmark is the first sign of the radical changes caused by the liberalisation of the Danish telecom sector. According to the newspaper, Børsens Nyhedsmagasin, analysts within the telecom sector expect that Tele Danmark must reduce its workforce by an additional 4,000 employees before 2000. In the light of the future competition, it is quite natural, according to the head of information at Tele Danmark, Kim Ruberg, that "we are an organisation which must constantly adapt". When such workforce reductions will eventually take place, and the precise numbers involved, is hard to predict.

By the beginning of 1998 the EU's telecom sector is due fully to be fully liberalised, and the employment impact is likely to be substantial according to an independent study carried out by French consultants BIPE Conseil on behalf of the European Commission and published in January 1997. Rapid telecom liberalisation could lead to the creation or maintenance of up to 1.3 million jobs across the EU economy by 2005. Within the telecom sector itself, the report suggests that traditional operators could lose up to 286,000 jobs, but that this will be offset by job creation in the telecom sector as a whole - by new operators, for example - which could lead to the net creation or maintenance of up to 93,000 jobs for the whole sector. The report is intended to feed into the current major debate based on the Commission's 1996 Green Paper on the social aspects of the "information society", which should lead to the formulation of an action plan during 1997. (Kåre FV Petersen, FAOS)

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