CyberWorks explores further restructuring to reduce costs
Wednesday, July 25, 2001
HUI YUK-MIN and BEN KWOK
Pacific Century CyberWorks is studying cost-saving measures that could include further trimming of its workforce, according to company sources.
The measures, which would reduce staff levels through natural attrition across the board and job losses in some business units, would make the company more competitive and help improve its revenue situation, they said.
It is not known when CyberWorks would implement its latest cost reduction strategy but sources said the company could start to reduce staff numbers as early next month, which would coincide with the anniversary of its takeover of the former Cable & Wireless HKT.
At the time of the takeover, CyberWorks chairman Richard Li Tzar-kai promised there would be no layoffs in the first year of operation.
Some staff cuts could happen as early as this week, when CyberWorks announces the formal launch of its Guangzhou calling centre.
The centre has held trials since May with the eventual aim of shifting its calling base from Hong Kong to the mainland.
One CyberWorks source close to senior management at the fixed-line business unit, HKT, said that the company could trim as many as 3,000 staff members without affecting operations. However, the final number would be substantially less.
The source said the company had been studying various options to reduce staffing levels as it came under increasing pressure to refinance debt obligations.
"Internally, we all know that if we lay off about 3,000 employees, the company will be more healthy," a source said.
"However, how we go about cutting this number of employees is very difficult."
CyberWorks has about 13,000 employees, of which roughly 10,000 are employed in the fixed-line division.
However, another source on CyberWorks' executive committee said there was no plan for massive layoffs on the table and suggested the story was being spread by disgruntled staff to force Mr Li to publicly confirm or deny his commitment to retraining staff.
It was believed that if any jobs were cut at CyberWorks, the bulk would come from the call centre, where workers who retire or resign were unlikely to be replaced.
By relocating the call centre to Guangzhou, the company could also reduce salary expenditure on the 2,000 workers employed in the division by a third.
The average monthly salary for a Guangzhou fixed-line operator is about HK$4,000, or about a third of what a similar worker would earn in Hong Kong.
A CyberWorks spokesman said there was no fixed plan at the moment for large-scale staff cuts.
Jonathan Iu, SG Emerging Markets Equity Research telecommunications analyst, said that about 30 per cent of staff at CyberWorks' fixed-line operation were redundant.
He estimated CyberWorks would save about HK$1 billion if it sacked these workers. "Yes, it's tough but for the benefit of the company and its shareholders, this has to be done," Mr Iu said. "This is about business, not charity."
Another proposal reportedly being considered was the introduction of a share option scheme, in which 10 per cent of a worker's salary would be paid in the form of share options.
This would mean an effective 10 per cent salary cut for all workers. A CyberWorks spokesman refused to comment on the plan.
On Friday last week, CyberWorks scrapped a US$2.5 billion bond issue which was aimed at raising cash to help pay off some of the company's US$4.7 billion debt.
The firm said it did not press ahead with the multi-billion dollar fund-raising deal because of volatile conditions in Argentina and other emerging markets.
CyberWorks' shares were heavily sold down yesterday. The counter dipped as low as HK$1.97 in early trade on worries about its debt situation.
The counter finished 4.71 per cent lower to close at HK$2.02.
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Published in the South China Morning Post. Copyright © 2001. All rights reserved.
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