AT&T is weighing a long list of plans to cut tens of billions of dollars in costs that will likely result in even more dramatic job losses for the connectivity and entertainment giant’s employees. The company previously said it plans to cut $1.5 billion in labor-related costs this year.
John Stankey, the company’s president and COO who is widely expected to be next in line for the CEO role, said AT&T is looking at “10 broad initiatives that we believe can generate double digits of billions over a three-year planning cycle” at an investor conference.
In the near term that includes efforts he described as “headcount rationalization,” or job cuts, and “benefit restructuring,” which is corporate speak for reduced benefits and higher out-of-pocket costs for employees. AT&T is also trying to bring down third party and supplier costs, as well as some opportunities to realize savings in its call centers, Stankey told investors.
AT&T shed 20,420 jobs last year, representing a 7.6% decline from 268,200 jobs in 2018 to 247,800 employees at the end of 2019.
A significant portion of those job losses are attributable to AT&T’s six-year effort to virtualize its core network functions with SDN and a more recent push to move more of its non-network applications to the cloud. It’s unclear how many employees AT&T plans to dismiss this year.
Software Eating Jobs
When longtime tech executive and investor Marc Andreesen famously wrote “software is eating the world” in the Wall Street Journal almost nine years ago, he primarily framed it as an opportunity for investment amid rampant disruption. However, he also warned that “many workers in existing industries will be stranded on the wrong side of software-based disruption and may never be able to work in their fields again.”
That is now undoubtedly happening to employees at AT&T and countless other companies. When the U.S. government approved a corporate tax cut in 2017, AT&T said it stood to save as much as $42 billion and pledged to increase investment and create 7,000 new jobs as a result.
AT&T’s capex was down nearly 6.4% in 2019 to $19.4 billion, and it projects a further capex decline of about $3 billion in 2020. Company executives maintain that its commitments have been met but the Communications Workers of America union, which represents about 100,000 AT&T employees, disagrees with that assessment.
Reading between the lines of recent comments made by AT&T management, the impact on jobs could be worsening from an employment perspective. Stankey said the company is considering major initiatives that will generate tens of billions of dollars in savings during the next three years, broken up by 12-, 24- and 36-month projects.
3-Year Cost Cutting Plan Underway
“What we’re doing around our IT rationalization and architecture rationalization, turning down applications, movement to the cloud, getting cost efficiencies in our very, very broad infrastructure, some of that facilitated by portfolio rationalization. You might see that out further,” Stankey said at the investor conference.
While Wall Street generally looks kindly on job cuts, and AT&T is desperate to continue reducing its debt, the continued job losses at one of the world’s largest network operators also underlines the impact software is having on the engineers and others who earn a paycheck from the industry at large.
Rakuten Mobile is preparing to launch a fully virtualized, cloud native open radio access network (RAN) in Japan that can be managed at significantly lower cost than legacy operators like AT&T. Rakuten Mobile CTO Tareq Amin said the open RAN framework alone is 40% cheaper than traditional telecommunications infrastructure. That also explains how the operator has deployed a nearly nationwide network with a couple hundred engineers and will be offering unlimited data, voice, and messaging services on its network for a monthly rate of $28.
Stankey also announced that AT&T’s 5G network now reaches more than 80 million people and that the company remains on track to have “nationwide” 5G coverage before July.