Struggling Indian operator Reliance Communications (RCOM) is planning to reduce its 15,000-strong workforce by 37 per cent by the end of the month, according to a report in The Economic Times.
The debt-laden company plans to outsource much of its operations, including its call centre and shared services, as it looks to exit non-core businesses and cut costs to boost profitability.
The fourth-largest mobile operator in India will sign agreements with two third-party companies to take on the business processes, with around 6,000 RCOM employees departing the company, of which around 4,500 are connected to call centre operations. The two outsourcing companies were not identified in the report.
A company official was quoted as saying that the call centre and shared services divisions are “highly inefficient and not adding any value to RCOM’s bottom line”.
The company will now focus on core telecoms issues, including customer acquisitions, sales, distribution and marketing, “to create a leaner organisation that is more cost-efficient”, the official added.
Another source said the staff cuts would create nearly INR2 billion ($33.3 million) in annual savings.
RCOM’s profit has been put under pressure for several years due to high costs related to debt built up as a result of spectrum acquisitions and expansion efforts.
Just last month, RCOM reportedly raised $800 million from a share issue, the proceeds of which the company said will be used to repay some its debts and deleverage its balance sheet.
The company had net debt of $6.7 billion at the end of March this year.
It was also reported that RCOM was considering a split of its GSM and CDMA business, with the latter marked for sale. And the company has also looked at selling a stake in its satellite TV business.
RCOM had 112 million connections at the end of the second quarter of 2014, according to GSMA Intelligence figures. This put it in fourth place behind Indian market leader Airtel (212 million connections), Vodafone (169 million) and Idea Cellular (141 million).
The operator will also face heightened competition when Reliance Jio Infocomm – controlled by Mukesh Ambani, the brother of RCOM owner Anil – launches a 4G service in 2015.
Reliance Jio Infocomm was a major bidder in the country’s spectrum auction earlier this year. In contrast, Reliance was not among the leading bidders, highlighting its debt pressures.