Telefónica announces workforce reductions

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In June 2003, Telefónica de España - the Spanish fixed telephony business of the Telefónica group - announced plans for a workforce reduction of around 11% in the short term, in order to deal with market difficulties and improve competitiveness. Negotiations are due to start on a redundancy procedure with trade unions.

The Telefónica group is the formerly state-owned Spanish telecommunications operator, and Telefónica de España is its fixed telephony business in Spain - the company also has a major mobile communications business in Spain as well as extensive foreign fixed and mobile operations (plus subsidiaries in areas such as internet and directory services). During the course of collective bargaining in June 2003 — the company's previous collective agreement expired at the end of 2002 — the management of Telefónica de España announced a decision to carry out a major 'rationalisation' of its workforce that could affect 4,500 workers within six months (11% of the total) and 9,000 in three years, according to trade union sources. This workforce reduction would not be the first (ES9907243N). The previous managing director carried out an adjustment that affected 10,841 workers, of whom 7,869 went into pre-retirement (ES0204206F). In 1995, there were 70,000 workers on the workforce of Telefónica de España, compared with the current figure of 40,800. While the overall workforce of the group has increased, that of its Spanish fixed telephony business has declined - see the table below

Development of Telefónica workforce, 1997-2001
. Telefónica group Telefónica de España
1997 92,151 64,100
1998 103,662 58,500
1999 118,778 46,600
2000 145,730 41,100
2001 161,029 40,832

Source: El Mundo newspaper based on figures from Telefónica

Telefónica de España management states that it is necessary to adapt to the new market conditions in the sector and to contain its continuing fall in income. The Spanish fixed telephony sector is facing a crisis caused by saturated markets, the appearance of new forms of communication and the emergence of competition in a sector formerly controlled by a monopoly. According to management, the number of telephone lines per employee (an indicator of productivity) is falling (or rising at a lower rate than expected), competitors have captured 20% of market share, the company has high fixed costs for the maintenance of its network, and prices are falling. The company also claims that its competitors (such as Auna, Ono, Jazztel and Uni2) are following a similar path of workforce cuts.

The proposed workforce reduction, which the company states will be based mainly on voluntary measures, could be partially compensated with an agreement to discontinue outsourcing plans that are already underway at Telefónica de España - it was planned to outsource non-strategic activities involving 1,500 workers in autumn 2003. The company's plans to introduce compulsory geographic mobility for workers could also be frozen if the trade unions agree to unify and flexibilise the system of occupational classification in bargaining over a new agreement.

A redundancy procedure (expediente de regulación de empleo) to implement the company's plans is due to be initiated shortly. The Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO) and the General Workers’ Confederation (Unión General de Trabajadores, UGT) have asked management for more information, while the General Confederation of Labour (Confederación General del Trabajo, CGT) suspects that the plan could be extended until 2005 and could affect 28% of the workforce, or about 11,500 employees. The unions do not rule out the possibility of mobilisations in protest.

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