TeliaSonera announces more spending cuts

CEO says landline telephony on its way out

Anders Igel

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The telecommunications company TeliaSonera announced on Tuesday that it was implementing further measures aimed at cutting costs. The statement came as the company reported its first quarter results. According to the figures, the result for January through March was EUR 499 million, up from EUR 465 million a year ago.
     The improved figures were seen as disappointing, and the company's share price plunged by 2.7 per cent in Tuesday's trading. Markets were equally unimpressed by the announcement by President and CEO Anders Igel that further cost-cutting measures were in store.
     
The TeliaSonera Board of Directors discussed the Q1 results already on Monday evening, and decided on new efficiency measures, after the numbers showed a decrease in the profitability of the company's broadband business.
     The company would not say which parts of its business activities would be affected by the cuts.
     However, the greatest reductions are expected in landline telephone operations and broadband services.
     Igel noted that profit margins in broadband service have declined, especially in Sweden.
     
Igel also predicted that the landline network for telephone services would die away in ten years. Revenue from landline telephony has decreased so much in Finland, that TeliaSonera is running the service at a loss.
     Broadband services using copper wire have not managed to offset the losses arising from reduced landline telephone services. TeliaSonera's broadband activities actually declined in the first quarter of this year.
     Igel emphasised that personnel cuts cannot be ruled out.
     
TeliaSonera is currently implementing a cost-cutting programme launched in 2005, which is expected to bring savings of between EUR 750 million and EUR 850 million by the end of this year. However, implementation of the programme has been slow, especially in Sweden.
     The company announced on Tuesday that it would speed up the implementation.
     
Last week TeliaSonera announced plans to cut between 160 and 180 jobs in its broadband business in Finland. However, this reduction will only cover a small portion of the savings that are being sought.
     Igel said that the programmes aimed at greater efficiency will be carried out this year, and that all necessary decisions would be made before the end of the year, but some of the effects will not be seen until 2008.
     The current cost-cutting programme aims at eliminating 3,000 jobs in Sweden over the next three years.
     
News of further cost-cutting came as a shock to TeliaSonera personnel. Taru Maria Solakivi, chief shop steward of TeliaSonera in Finland, found it hard to imagine how the belt could be tightened any further.
     TeliaSonera's personnel in Finland has declined by about 1,000 to 6,100 in the past two years.
     Solakivi took part in the meeting of the TeliaSonera Board where the decision was made on new efficiency measures. The board did not specify any concrete goals, numbers, or schedules, leaving those matters up to the company's management and organisation.
     The Finnish chief shop steward sees the board's move to be primarily aimed at promoting profits for TeliaSonera's shareholders.
     
The company's turnover grew by 3.4 per cent in the first quarter of the year. The gross margin percentage, which reflects profitability, went down from last year's 35.6 per cent to 33.4 per cent.


Links:
  TeliaSonera press release: Interim Report January-March 2007

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