Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Svyazinvest to Lay Off 20,000

Telecommunications holding Svyazinvest is planning to lay off some 20,000 employees at its subsidiaries nationwide in an effort to cut expenditures.

"Over the past two years, the costs at Svyazinvest's subsidiaries have grown by more than their income," said Svyazinvest deputy director Alexander Lopatin, who promised to rein in the holding's expenditures this year.

Wages account for some 40 percent of costs in the telecommunications sector, and Svyazinvest's subsidiaries account for more then 380,000 of the holding's employees.

"Managing losses in terms of personnel and optimizing equipment supplies allows the unfavorable tendency of rising costs to be reduced," said Yuliana Sokolenko, chief specialist for investor communications at Svyazinvest.

Svyazinvest has shed 1.1 percent to 3.5 percent of jobs annually in recent years, while this year 4 percent to 5 percent of employees are expected to be sent packing.

This is only an average, Sokolenko said. For example, Altaitelecom announced that in 2002 the company would slash its staff by more then 25 percent, or 2,000 employees.

Svyazinvest would cut even more jobs if not for the on-going restructuring. The holding is currently uniting hundreds of its regional subsidiaries into seven super-regional operators.

The All-Russia Communications Union has told Svyazinvest that the layoffs would violate a program put in place to protect workers during the restructuring. Workers must be laid off only as a last resort, the union said.

Svyazinvest announced on its web site that union representatives will participate in board meetings at which the layoffs will be discussed.

The job cuts, however, also affect investors, who know the sector is overemployed.

"Ideally, they should cut 70 percent to 80 percent of the staff and give the others a pay rise," said Yevgeny Golosnoi, an analyst with Troika Dialog.

The reason for the overemployment is low-quality equipment. More than 70 percent of lines in the country are decrepit and require far greater staff than in other countries. Currently, one employee services about 70 communication lines, while in other countries the number is 600.

During the restructuring, however, there is no need to fire more than 2 percent of employees per year, Golosnoi said.

Employees of many regional communications companies became shareholders in the process of privatization -- and those that are fired may flood regional courts with lawsuits, which could slow the merger process considerably.