Moscow: VimpelCom Ltd. plans to cut thousands of jobs in Russia as Chief Executive Officer Jean-Yves Charlier accelerates a revamp of the wireless carrier hit by the country’s recession and stiffer competition.
The reductions focus on excessive management layers and will be made within six to eight months, country head Mikhail Slobodin said in an interview with the state-run Rossiya 24 television channel. VimpelCom will cut “tens of per cents” of its 27,000 Russian jobs, he said, without being more specific. Client-facing positions won’t be affected.
“We don’t yet see sales declining,” Slobodin told Rossiya 24 late Monday in remarks confirmed by the company’s local representatives. “Still, it’s obvious that the industry is under serious risk of moving toward a revenue drop.”
Charlier, the former head of French phone company SFR who started at VimpelCom in April, is trying to reverse a sales drop caused by currency fluctuations and Russia’s slumping economy. He began a restructuring of the carrier, which operates in more than a dozen countries, last month in a bid to boost cash flow by $750 million within three years.
Shares of the company have gained 12 per cent this year after dropping 68 per cent in 2014. They declined 0.6 per cent to $4.66 in New York Monday.
Deepening Slump
Intensifying competition, including a planned entry by Tele2 Russia to Moscow, has been a catalyst to VimpelCom’s Russia restructuring, Slobodin said. Tele2 Russia, the country’s fourth-largest wireless carrier and backed by VTB Bank PJSC and Rostelecom PJSC, is set to start services in the Moscow region next month.
Russia’s economy shrank 4.6 per cent in the second quarter from a year earlier after a 2.2 per cent drop in the first three months. A plunge in prices for oil, Russia’s main export earner, triggered the recession along with US and European sanctions against the country. The economy may continue to shrink through 2016, according to the central bank.
VimpelCom, the third-biggest wireless carrier in Russia, is the first of the country’s phone companies to announce major job cuts in response to the recession. Still, larger rivals are also taking action to cope with the slump.
Mobile TeleSystems PJSC, Russia’s biggest operator, agreed to jointly build and operate faster networks with VimpelCom in certain regions to cut costs. It also accelerated a network roll-out to reduce risks related to a potential weakening by the rouble later on. MegaFon PJSC, the No. 2, in April delayed the majority of its dividend payment to the latter part of the year to preserve US dollars.
Merging Operations
VimpelCom, co-owned by billionaire Mikhail Fridman and Norway’s Telenor ASA, generates more than a third of its sales in Russia. Slobodin moved to run the Russian unit from oil producer TNK-BP after Fridman and his partners sold the energy company to a state-run firm in 2013.
VimpelCom is merging operations in the Volga region with those in the Ural region, while combining its Siberian unit with that in Russia’s Far East to cut excessive management layers, according to an emailed statement from the company Tuesday.
Another major market for the company is Italy, where it’s combining its business with that of CK Hutchison Holdings Ltd. in a deal valued at about $24 billion. The company is also weighing its options for its small operations in Laos and Zimbabwe, which it has earmarked for disposal, Charlier said last month.
