Automation and AI begin to impact telco jobs

This article, drawn from our latest Digital Transformation Tracker report (DTT 7), looks at how the challenging macroeconomic environment, 5G spending, and the rise of automation and AI are impacting telco jobs. Download the full report to learn more about the state of telco transformation in 2023.

In May Vodafone Group and BT grabbed headlines when they were forced to announce significant job reductions. Since then, the cuts across the industry have kept coming.

Notably, exiting BT CEO Philip Jansen, who said his company had made progress in 2022 despite “an extraordinary macroeconomic backdrop”, attributed nearly 20% of his company’s planned job cuts to AI and automation. He said that by 2030 BT will cut potentially more than 40% of its workforce “by continuing to build and connect like fury, digitize the way we work and simplify our structure”. He added: “By the end of the 2020s BT Group will rely on a much smaller workforce and a significantly reduced cost base.”

Jansen is one of only a few telecoms executives to proclaim publicly that he is aiming for a significantly smaller workforce because of automation and AI. Telenor CEO Sigve Brekke is another. Back in 2018 he said that automation and digitization would be responsible for 6,000 job losses at his company by the end of 2020.

“Our efforts toward digital transformation, simplification and efficiency continue, with an increasing focus on structural improvements,” Brekke stated in the company’s 2018 annual report. Today its headcount is 55% lower than it was in 2017 (see table and sidebar below).

Vodafone Group CEO Margherita Della Valle was forthright about the company’s need to cut jobs. “Our performance has not been good enough. To consistently deliver, Vodafone must change,” she said. But rather than point to automation, she alluded to simplification and reducing complexity. Upon announcing that Vodafone would cut more than 10% of its workforce over the next three years, she said: “We will simplify our organization, cutting out complexity to regain our competitiveness.” (This week during Vodafone’s first quarter earnings call, Della Valle was able to report making some progress on the company’s turnaround.)

The AI effect

Until now, most C-level executives have characterized staff reductions as balancing out because they’re hiring so many new skills. Vodafone, for example, is continuing its push to hire thousands of new software engineers, even though it intends to cut from its centralized technology division as part of its reductions.

“For a long time, our industry was very outsourcing dominated: We set strategy and then we worked with partners to build technology and run with it. In a software world, that just doesn’t cut it,” said Vodafone CTO Scott Petty during a recent panel discussion.

“You have to have your own software engineering capabilities, your own teams… If you don’t have those skills and you’re not driving those insourcing strategies, you’re just not going to be able to move fast enough and build the platforms that we’re talking about, or even probably understand the technologies and methodologies for deploying those technologies in an effective way.”

But developments in technology like generative AI and large language models (LLMs) are likely to help telcos and other companies cut jobs much faster than they anticipated a year ago. Jansen said as much during BT’s earnings call this spring, explaining that the company will need 10,000 fewer network engineers to run its digital networks and that automation and AI is set to replace an additional 10,000 roles. He pointed to “huge opportunities” to use AI, noting that LLMs are a disruptor rivaling the smartphone.

“All the equipment’s simpler and newer and more flexible, more nimble. And we’ve got AI and all the data that can help create self-healing networks,” Jansen said. “So, we’re going to be a massive beneficiary on efficiency and costs, which is why we know we won’t need all these roles in the future.”

Similarly, on an earnings call with financial analysts in May, AT&T CEO John Stankey said his company is using AI “to improve fleet dispatches so our field technicians can better serve customers”. The company is also using it in customer care. “We think this is only the tip of the spear of what’s possible,” he said.

Many CSPs are shrinking the size of their workforces

The table on the right, compiled from CSPs’ annual reports, shows the change in employee headcount during the past five years. While a handful of operators have increased the size of their workforce, most have shed a significant number of jobs, often quietly.

Some large reductions have been the result of divestment – AT&T’s spin-off of WarnerMedia, for example. Sometimes the cuts have been because of retirement, with CSPs opting not to fill the vacated posts: TIM told Reuters in March that it is seeking to cut 2,000 jobs through voluntary retirement.

In other cases, the eliminated jobs belong to contractors. BT’s latest round of reductions, for example, includes contractor roles no longer needed to build fiber at scale. Similarly, Axiata XL in Indonesia reduced its workforce by 31% in 2019, primarily by cutting outsourced roles. Dialog Axiata in Sri Lanka cut its workforce by 28% in the same year.

While most telco workforces are shrinking, a handful of companies are growing jobs. Bharti Airtel and MTN Group operate mostly in developing countries where customers and new service take-up are still growing. Others like NTT and Telus are growing through acquisition. NTT, for example, has grown through acquisitions made by its NTT Data Systems IT services division, which has bought 13 companies in North America alone in the past four years.

The huge increase at Telus is the result of acquisitions and growth in the company’s “beyond connectivity” units. In September 2022 the operator completed a $2.3 billion acquisition of LifeWorks, which has become part of Telus Health.

But Telus is also looking to AI to reduce staff. In mid-July the company was forced to lower its outlook for 2023 because of “unprecedented” and “severe, global pressures” on Telus International (TI), the company’s enterprise IT services unit.

“Our TI team is judiciously focused on optimizing its own cost structure, including reducing staff levels to address lower service volumes in the technology sector, as well as pervasively deploying automation and GenAI-enabled solutions internally to drive down its cost to serve,” the company stated.