Bad news from Europe to kick off the fall earnings season: TeliaSonera revealed on Wednesday it will layoff 2,000 employees, about 7 percent of its workforce, over the next two years. The Finnish-Swedish mobile operator is attempting to “simplify” its operations in response to sluggish growth across Europe.
TeliaSonera is basically getting hit from two sides. Not only is the economic climate taking its toll on European operators, in some countries like Spain, people are even ditching their mobile phones. But even before the recession hit, most European operators faced the problem of saturation. Every man, woman and child has a mobile device – in many cases more than one — leaving no new customers to sell to.
That problem is particularly acute in TeliaSonera’s core Nordic markets. Finland and Sweden are home to Nokia and Ericsson and have long been hotbeds of mobile innovation and rapid adoption. It was in those countries that device penetration levels first topped 100 percent in the previous decade.
So TeliaSonera’s subscriber base isn’t growing; neither are its revenues. However, its costs are increasing as those subscribers do more with their devices. TeliaSonera was the first operator in the world to launch LTE, and mobile data traffic on its network has ballooned. Furthermore, customers are moving away from TeliaSonera’s traditional voice services to VoIP applications like Skype, cutting deeper into the carrier’s revenue stresses. That led to TeliaSonera’s controversial decision this summer to charge customers extra for using over-the-top communications services.
TeliaSonera CEO Lars Nyberg justified these new policies as necessary steps operators need to take to adjust to the new wireless world order. He said in the carrier’s earnings statement:
“Our customers’ behavior is changing rapidly and we must change our business models from being voice to data centric. As an example, we launched new subscriptions in Sweden in September where our customers can continue using Skype and other mobile IP-telephony services just like before. At the same time, we have adjusted our data prices to better meet the growing demand for data communication.”
In the next few weeks we’re probably going to see a lot of poor earnings reports from European operators, many of which are facing the same issues of poor economic conditions and market saturation.
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