Vodafone and Three merger will further decimate UK telco jobs

　　The confetti from a detonated party popper dangles off a greasy monitor, where it flutters in the rancid gusts of carbon dioxide that emanate from a snoring executive. Across the open-plan office, workstations are buried under boxes of half-eaten pizza and part-drunk bottles of booze. Visible desk space is sticky with spilt champagne.

　　This imagined scene is probably more reminiscent of the 1980s financial sector than the 2020s telecom industry, which features a surplus of sensible behavior. But something like it could have followed last week's news that Vodafone and Three, two mobile network operators in the UK, will be allowed by regulators to merge.

　　executives involved in the deal will certainly have felt there was a strong justification to celebrate, having forcefully argued over the preceding 18 months that Vodafone and Three needed a merger just to cover their costs. The Competition and Markets Authority (CMA), which made the final decision about the tie-up, disagreed neither would be commercially viable in the absence of a merger but allowed it to go ahead regardless. Nor did the authority mandate any onerous structural remedies. Consumer protection used to be the guiding principle in these sorts of decisions. Now it seems to be the industry's welfare.

　　Vodafone and Three, of course, insist consumers will also be better off once they merge to spend £11 billion (US$14 billion) on a pristine 5G network. But it's a different case for employees of the two organizations, including some people responsible for working on the deal mechanics. No telco needs duplicate bosses or managers, and the overlap between Vodafone and Three – as companies doing exactly the same thing – is huge. Some departments face a potential gutting. The hangover after those celebrations could be nasty.

　　where did all the employees go?

　　Job losses are an unfortunate consequence of any merger in any sector, but little was said about them in relation to Vodafone and Three while the CMA did its work. The merging companies, though, made clear from the outset their intention to save a lot of money through "synergies," usually business jargon for cuts. By year five (so probably sometime in 2030) these savings "are expected to amount to more than £700 million [$893 million]," said Vodafone in its original press release. This would exceed Vodafone's labor costs for UK employees last year, according to a filing with Companies House.

　　Both companies have already shrunk in the last six years, although not as much as some of their peers have in the UK and overseas. Annual reports indicate Vodafone employed an average of 11,525 people at its UK subsidiary in its 2019 fiscal year, which ended in March 2019. The number had dropped to 9,198 by 2022 before rising to 9,640 by the year ending in March 2024. What has happened since then is unclear.

　　As for Three, it boasted around 5,400 employees at a press conference in April 2019, when it was under previous management. The plan then was to slash between 700 and 800 technology jobs by outsourcing work to Microsoft. But the cuts do not seem to have gone as far as planned. Today, the operator has some 4,800 people on its books, according to its website. A spokesperson for the company says the figure is up to date.

　　Future anticipated cuts across the combined workforce of around 14,440 employees (assuming Vodafone still employs roughly 9,640 people) would come at a bad time for the UK sector. BT, the biggest of the UK's mobile network operators, and the operator of its largest fixed network, has in recent years taken a sharp axe to its workforce, cutting more than 15,000 permanent jobs since the 2019 fiscal year, about 14% of the total. Include contractors in the equation and it looks even worse.

　　What's more, Allison Kirkby, BT's newish boss, seems determined to follow through with the plan of her predecessor, Philip Jansen, by pruning BT even more aggressively between now and 2030. At the end of September, BT had about 118,000 employees, including contractors. By 2030, as many as 43,000 and no fewer than 28,000 will have gone under current plans.

　　There have also been losses, albeit on a smaller scale, at Virgin Media O2, the organization formed from the earlier merger of Virgin Media, a cable company, and O2, a mobile operator. In 2020, before their merger was concluded, the two companies had a combined headcount of 17,961, according to published accounts. By last year the number was down to 15,700, a reduction of one in eight jobs.

　　Automation nation

　　Unlike Virgin Media and O2, or BT and EE before them, Vodafone and Three are bringing together two mobile networks. Even accounting for an increase in the footprint, with plans to operate 26,000 mobile sites compared with about 18,000 for each telco previously, there is obviously scope for layoffs on a much bigger scale.

　　The companies may also be under immediate shareholder pressure to reduce costs where they can. The decommissioning of sites could be difficult and expensive because of future contractual obligations with site owners and network-sharing partners. Under CMA-imposed "behavioral" remedies, Vodafone and Three will have to hit specified targets for site rollout and spectrum activation, and they will be more closely monitored than under today's licenses. This will put an effective floor beneath spending on network deployment. To compensate, financial bosses may be looking for opportunities to make heavy cuts elsewhere.

　　Technology seems to be helping, too. The mislabeling of analytics and pattern-recognition software as "artificial intelligence" is largely responsible for society's fears about the looming obsolescence of the human worker. Nevertheless, telcos have been investing in software-based "chatbots" to replace the interactions customers would previously have had with flesh-and-blood assistants. Networks are increasingly automated, able to run themselves, adapt to changing circumstances and anticipate problems. Outsourcing to the public cloud giants of Amazon, Google and Microsoft has hollowed out IT departments.

　　As with previous waves of technological change dating back to the Industrial Revolution, jobs will be created in other areas, say apologists. But they evidently won't be created in telecom, whose total workforce has shriveled to a fraction of its earlier size as sales have stopped growing. A buildout of 5G will need people for heavy lifting and assembly at mast sites. For many others, the time for celebrating is probably over.