Hungary's Matav To Cut A Quarter Of Its Workforce

BUDAPEST (AFP) - Matav, Hungary's biggest telecommunications company, will eliminate 3,750 jobs or 25 percent of its workforce within two years in a cost-cutting measure aimed at confronting fierce industry competition, the firm said in a statement posted on its website.
Matav said Monday that the reduction in its workforce from 14,700 to 10,950 employees would be completed by 2006 and should save the company 20 billion forint (81 million euros, 98 million dollars) annually.
The firm said the cuts, to be completed in several rounds, were necessary in order to stay competitive in the liberalised telecommunications market.
"In order to respond to the challenges of the liberalised telecommunications market, Matav has through the years significantly cut its wholesale and retail prices," the company statement read.
"The continued reduction of prices in line with market expectations can only be realized ... if Matav completes its efficiency programme. Part of this programme is the employee-rationalisation plan," Matav said.
Most of the employees who are to lose their jobs work for Matav in Hungary, but the company's Macedonian subsidiary, MakTel, will also see its staff reduced by 750 workers from the current level of 3,000 employees, the company said.
Analysts have pointed out that the local giant of the telecommunications sector, 100 percent state-owned until 1993, needed to slim down its operations in order to cut costs.
"Matav has never quite shed its reputation for being an old-style company that over-employed," Peter Makray, an analyst with Erste Bank in Budapest, told AFP.
"The announcement of the 3,750 layoffs is dramatic and looks certain to contribute to a more profit-oriented approach," he said.
As part of its effort to boost efficiency, Matav plans to increase the number of fixed telephone lines handled by each employee from the current 353 lines to over 500 lines by 2006, the statement said.
The firm posted net earnings of 57.5 billion forint (233 million euros, 283 million dollars) in 2003, down 15.6 percent from its 2002 results.
Matav has topped market share in both fixed-line and mobile subscriptions, but has seen its positions erode with increased competition.
While retaining 81 percent of the less dynamic fixed-line market share since industry liberalization in late 2001 allowed the competition to take on the once hegemonic Matav, the firm's share of mobile subscription is continuously under threat.
Matav's T-Mobile service, which boasts a market-topping 47.4 percent of total mobile subscriptions, is facing fierce price pressures from the other two operators, Norwegian Telenor-owned Pannon GSM and Vodafone.
Government tenders for third-generation mobile licenses, published in August, could provide growth opportunities for Matav, but they will also bring added competition and lower prices, analysts note.
"There are four 3-G licenses up for grabs, so there will be a new player in the market who will also get a GSM license, which should make the already fierce competition in the mobile sector even more intense," said analyst Kornel Szabo Sarkadi of Raiffeisen Bank.
"I see Matav earnings falling a further 10 to 15 percent in 2004 from last year, until the staff rationalizations kick in by 2006 which should make the firm more competitive," he said.
Matav was privatised in three rounds beginning in 1993.
Deutsche Telekom AG is the biggest shareholder in Matav, holding 59.2 percent of company stocks, while the state only retains a golden share in the firm.