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Brazil's Oi trims over 1,000 jobs in cost-cutting push

Wednesday, April 1, 2015 - 19:13

[SAO PAULO/RIO DE JANEIRO] Brazilian telecom group Oi SA is eliminating 1,070 jobs this month in a cost-cutting program that will define how much it can invest this year, the company told Reuters exclusively as pink slips began to go out on Wednesday.

The job cuts, along with strict controls on hiring, overtime, travel and even when the office lights go off each night, are part of a drive to bring down personnel-related expenses by nearly 20 per cent, Oi told Reuters in a statement.

Chief executive Bayard Gontijo, who set the cost-cutting agenda in motion when he took over in October, said last week that Oi's capital expenditures in 2015 would depend on how much of its cash flow could be freed up with cost controls.

The net effect of the job cuts will be a 6 per cent reduction of Oi's roughly 18,000 full-time jobs, according to the company.

The layoffs are part of a broader downturn in Brazil's labour market, where the jobless rate has climbed more quickly than expected as companies brace for an economic recession that many economists are calling the worst in 25 years.

Carmakers have shed 8 per cent of their workforce in the past year and civil construction payrolls are down 7 per cent. Other telecoms are also cutting back, with Telefonica Brasil SA and Nextel operator NII Holdings Inc both saying in the last two months that they planned to trim jobs.

Oi's second-quarter earnings are likely to reflect a spike in one-time severance costs from the layoffs underway. The full financial impact of the measures was not immediately clear, since savings will be spread across accounting lines including payroll, third-party services and other administrative expenses.

Almir Munhoz, the president of Brazil's national telecom workers union, told Reuters that he was notified of the job cuts on Tuesday. He said the union was seeking additional severance benefits for those who will be affected.

Gontijo, who spent more than a decade rising through Oi's executive ranks, has pitched the cost cuts as the operational component of a turnaround strategy for the heavily indebted company.

He also aims to close the sale of Oi's Portugal division to Altice SA for 7.4 billion euros (S$10.9 billion) by the end of June and is working to untangle the company from assets in Africa later this year.

Those asset disposals should help to bring down Oi's net debt, which totaled 30.563 billion reais (S$13.1 billion) in December. Rivals Telefonica Brasil and TIM Participações SA had net debt of 2.327 billion reais and 1.274 billion reais, respectively.

REUTERS

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