Telefónica may shed fifth of workforce in Spain

Spanish telecoms giant Telefónica is considering cutting its fixed-line and internet workforce by 20 percent in Spain where sales have declined, the company said in a presentation to investors on Thursday.

The announcement was made by Guillermo Ansaldo, the chairman of Telefónica domestic unit Telefónica de España. The telecoms operator employs a total of 32,000 in Spain, of whom 28,000 work for its fixed-line and internet operations. A cut of 20 percent would, therefore, imply the company shedding 5,600 workers.

Telefónica had already announced plans to cut costs during its presentation of its 2010 earnings in February. Among the measures underway, the company is cutting the ranks of its middle management by 6 percent, for which it has already made a provision of 202 million euros.

The company wants any job cuts to be agreed beforehand by labor union representatives. After booking record earnings of 10.167 billion euros last year, the company would be hard pressed to argue the need for retrenchment on economic grounds.

Other measures to increase productivity and make the company more flexible include linking wage hikes more to productivity than inflation. Currently 85 percent of the company's workforce are covered by collective agreements that include clauses indexing salaries to inflation. As a result, every percentage point rise in the consumer price index adds 15 million euros to Telefónica's wage bill.

Telefónica's current collective agreement has been extended and management and union representatives need to renegotiate a new accord.

In his presentation, a copy of which was filed with the Spain's National Securities Commission (CNMV), Ansaldo noted that Telefónica de España revenues had fallen in the past two years as a result of the weakness of the Spanish economy and heightened competition.

The fall in sales was even more notable in higher-margin segments. In its mobile division, Telefónica is second only to Vodafone as the company that has lost most clients in Spain due to switching to other operators, while it suffered a drop in internet customers for the first time ever in February of this year.

Telefónica is looking to maintain a market share in Spain of 48-50 percent in 2013.

Ansaldo also said Telefónica will look to sell non-strategic assets, which will bring in 600 million euros over the next three years. It is also looking to reach an agreement with rivals to share investment in its new fiber-optic network.

Telefónica on Wednesday said it was aiming for annual growth in revenue of between 1 and 4 percent in the period 2011-2013, while investing 27 billion euros.