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Mark Aue 2degrees
2degrees CEO Mark Aue

Rob O’Neill at Reseller News writes 2degrees slashes costs, 120 jobs to go.

Telecommunications provider 2degrees is planning to cut its 1,200-strong workforce by 10 percent as it braces for the impact of the coronavirus pandemic.

2degrees also briefed its people today on a range of cost reductions to respond to the impact, advising that while agreed measures went a long way, more would be required through staffing changes.

The company is therefore proposing a 10 per cent reduction in the company’s workforce.

In addition the company plans to reduce capital spending and defer non-essential projects, reduce operating costs including a freeze on recruitment, renegotiate supplier rates and vendor costs and an accelerate cost saving initiatives from 2021. 

Aue said that although 2degrees’ people are its biggest asset, the “harsh reality” was that the company had to take decisive action, reducing staff numbers or the hours worked for some roles.

Covid-19 was always going to be awful for businesses. New Zealand, and for that matter the entire world, has never seen such a dramatic and fast slump in demand.

Yet telecommunications companies, especially those with their own mobile network ought to be doing well out of this. After all call volumes and demand for broadband services are at an all time high.

One problem is that thanks to the emergence of unlimited call and data plans there is no longer a direct correlation between demand and revenue. 2degrees can carry twice as many phone calls and deliver twice as much data without earning much more.

At the same time roaming revenue is close to zero. Roaming has become much cheaper in recent years, we no longer see headlines about people returning from overseas to face horrific telephone bills. Even so, roaming is still lucrative for mobile carriers. It costs them little and the margins are high relative to the rest of the business.

Telcos have been trapped in profitless growth for some time now. Margins are wafer thin. I recall Vodafone CEO Jason Paris telling me some time ago that the industry has competed away most of its profit.

Phone companies like 2degrees need to continue to invest in new technologies and add capacity to meet demand while revenue flatlines. Losing roaming may even see total revenue drop this years. It doesn’t help that 2degrees’ parent company is not healthy at the moment. Unlike Spark and Vodafone, 2degrees has yet to jump into the expensive business of a 5G network upgrade.

Horrible as it is to make people redundant, Aue is right to act early. Things can get worse. They probably will get worse. It’s possible we will see a wave of industry consolidation in the coming months. And it’s a near certainty that 2degrees is the major telco most likely to undergo some form of change as events shake down.

6 thoughts on “2degrees cuts workforce 10 percent

  1. Sad news, but I agree. Best to face up to things early.

    On this: “I recall Vodafone CEO Jason Paris telling me some time ago that the industry has competed away most of its profit”:

    That’s kind of the point of competition – to ensure the benefits flow to the consumer.

    • True, but there is a pay off. You want your key service providers to be profitable enough to not be vulnerable, but not so profitable they can be rapacious.

  2. Telecommunications provider 2degrees is planning to cut its 1,200-strong workforce by 10 percent as it braces for the impact of the coronavirus pandemic.

    And he’d be wrong. 2degrees is just doing what it already planned to do to maintain profitability – the coronavirus is just something to hide behind.

    Aue said that although 2degrees’ people are its biggest asset, the “harsh reality” was that the company had to take decisive action, reducing staff numbers or the hours worked for some roles.

    People may be any companies biggest asset but they’re also the least productive. That’s why there’s always been such a push for automation. This brings about high unemployment which pushes wages down and thus also brings about the end of the ‘service economy’ that the economists and politicians have been pushing for the last 40+ years.

    I recall Vodafone CEO Jason Paris telling me some time ago that the industry has competed away most of its profit.

    The whole point of competition is to get rid of the dead-weight loss of profit so it appears that its been working. Retail simply isn’t profitable when there’s adequate competition involved which is why we’ve seen so much consolidation of competing companies over the last few decades and how we get Forbes publishing articles with the headline of The 147 companies that control everything.

    Of course, if telecommunications were provided as a government service there’d be no need of a profit and everyone would understand the need for occasional redundancies as automation took over. It’s not the destruction of well paying jobs that’s the problem but the fact that we don’t have anything to replace them with. The ‘service economy’ doesn’t cut it as has been proved.

    Personally I’m in favour of a ‘development economy’ where more and more people go into Research and Development and automated manufacturing stays onshore rather than being shifted to the cheapest human workforce in the world as we’ve seen over the last 50+ years.

  3. A lot of 2 degrees customers don’t have unlimited data, they have low end plans that they can ratchet down even further when there is almost no need for data outside the house.

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