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BT and Big U.K. Rivals Expected To See Revamping, Large Layoffs
By RICHARD INDER
Dow Jones Newswires

LONDON - Britain's telecommunications industry is facing massive restructuring that is likely to lead to large-scale layoffs, particularly for industry giants like British Telecommunications PLC.

Peter Cochrane, who heads BT's research laboratories near Ipswich, England, and has been employed to help the United Kingdom's second-largest telecommunications company navigate the changes in technology, management and business sweeping through the global telecom industry, says BT is being forced to change in much the same way as its U.S. telecom rivals.

"Like its competitors, BT will have to refocus its work force to address new market opportunities," Mr. Cochrane said in an interview. "The accelerating pace of the market means we do not have 10 years; we now have to move at Internet speed."

Rapidly falling tolls for network customers and the spread of interactive services are forcing telecom heavyweights to focus on broadband transmission via fixed-line networks or on high-value customer services, Mr. Cochrane said.

The U.S. has already moved ahead of European telecom companies in delivering higher sales from fewer staff. Major U.S. companies are generating sales per employee of almost $364,000, more than 50% above BT's $229,000 per employee.

BT's earnings per employee stand at about $38,000, compared with just over $40,000 for U.S. companies such as AT&T Corp., MCI WorldCom Inc., Bell Atlantic Corp., SBC Communications Inc. and BellSouth Corp.

The continuing sharp fall in the unit costs of network capacity is forcing companies to carry increasingly large amounts of traffic just to remain profitable, Mr. Cochrane said. This, in turn, fuels consolidation among network providers, he said. In the long term, Mr. Cochrane believes, the market will sustain only four global network providers.

Because of the increased competition in the industry, consumers are much less responsive to price cuts than they were a few years ago, he said. "The price elasticity has fallen out of the market, companies will have to do away with their billing systems." he said. Flat-rate access charges for domestic and commercial users will be the norm, he said.

Mr. Cochrane said BT has several major competitive advantages over new entrants: the ability to move large amounts of data nationally and internationally, and links into every U.K. home.

"There are some wonderful service opportunities and they have to move into them and do it in the next decade," he said. As possibilities, he suggested gas stations that would offer data ports enabling customers to download movies or music onto their cars' computers while they fill up; schools setting up their own cellular-phone services for students; and governments requiring cars to carry Global Positioning System satellite units to levy road-use charges.

He says large telecom providers, with their focus on providing networks, face huge challenges in competing for this new business. Network business managers, focused on providing a reliable service, are less adept at operating consumer businesses, which survive by exploiting short-term market opportunities.

He said BT, which employs more than 100,000 people, has been able to adapt to the new environment. Investors appear to agree. BT shares traded in London late Wednesday at 14.22 ($22.93), down 25 pence but just 37.5 pence shy of their record high.

Richard Inder

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