BT job cut news sends India’s tech stocks reeling
SOURCE: International Business Times
DATE: Nov 14th, 2008
Stock prices of India’s major IT firms went reeling, Friday, on news that British telecoms giant, the BT Group Plc. will reduce its workforce by 10,000 employees in its attempt to cut costs in the current financial year.
Stock prices of India’s major IT firms went reeling, Friday, on news that British telecoms giant, the BT Group Plc. will reduce its workforce…
BT, which has a global workforce of around 160,000 direct and indirect staff, said it would cut around 4,000 from its direct BT staff and the remainder from contractors, sub-contractors, consultants, agency staff and offshore workers, in its attempt to cut costs by $1.2 billion. Most of the job cuts, BT said, would be effected by not filling positions after people retire or leave and increasing the retirement age.
BT said it was halfway through the process of downsizing and had already cut 4000 jobs to date.
BT refused to disclose the names of countries where it is planning to offload its employees, saying it hoped to achieve the cuts through natural turnover. “It is too early to know country-specific job cuts. The majority of the job cuts will be in the UK with the rest peppered around the world and not just in India,” the telecoms giant said in a statement.
According to BT Group CEO Ian Livingston, BT Retail, BT Wholesale and Openreach are doing well but BT Global Services is struggling. “Profits in BT Global Services are simply not good enough and we are taking decisive action to put matters right. We need to carry on delivering cost savings. What we have to do now is translate revenue growth into better profitability,” he said.
According to Livingston, BT will reduce its reliance on consultants and contractors as it gears up to survive the ongoing economic downturn. Of BT’s 160,000 workers, 50,000 are contract staff. “The majority of cuts will be indirect workers. We will be redeploying and retraining our own people. We think it is the right thing to do, both financially and morally,” he said.
BT reported 18 percent rise in net profit in the second quarter of the current fiscal year.
The new has sent shudders in India’s IT-BPO industry, sending share prices of Tech Mahindra, TCS, Infosys, Wipro and HCL Technologies reeling.
At 1.15 pm, on the National Stock Exchange (NSE) on Friday, Tech Mahindra’s stock was down 4.36 percent at Rs.299.50, while those of Wipro, Infosys Technologies and HCL Technologies were down 2.08 percent, 2.26 percent and 0.06 percent at Rs.242.50, Rs.1231 and Rs.154.50 respectively.
However, TCS was up 0.30 percent at Rs.536.50.
BT is a partner of India’s leading IT services and solutions provider to the telecom industry, Tech Mahindra and its biggest client, contributing to at least 60 percent of its revenue.
Besides being the primary client of Tech Mahindra, BT is also one of the top 10 clients of Infosys, Wipro and TCS.
HCL Technologies also relies on BT contracts for a major portion of its revenue and close to 2000 of its employees work for BT in Northern Ireland and handle its business telemarketing, billing and conferencing work.
BT also has a captive center at Gurgaon – the Global Operations Centre – that has close to 300 employees. The center runs core and mission critical systems and processes for various lines of business apart from providing functional support to group functions like procurement, legal, finance and HR.
BT has so far announced that the job cuts will not affect its business relationship with Tech Mahindra, whose 12,000-odd employees work on BT deals.
“Tech Mahindra is, and will continue to be, a key commercial partner with BT. We have a number of long term contracts in place with Tech Mahindra that will be unaffected. Going forward we do not see a material impact on our outsourced activities with Tech Mahindra,” said Clive Selley, managing director, BT Design.
However, the news of retrenchment comes at a bad time for India’s IT-BPO industry, which is already burdened by concerns that a slowing global economy would result in fewer outsourcing orders, leading to reduced profits and massive job cuts.
The IT-BPO firms are also keeping a watchful eye on US president-elect Barrack Obama, who, during his election campaign, gave hints of a protectionist regime, saying he would give tax breaks to “companies that hire in the United States and end tax breaks for companies that ship US jobs overseas.”
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