AT&T cuts its losses

The American phone giant admits defeat in Britain and sheds 60 staff

AT&T WILL announce this week that it plans to cut 5 per cent of its staff in Britain as its two-year bid to draw consumers away from British Telecommunications has failed to make a major impact.

The American phone giant will cut 60 staff out of a total of 1,200 in the UK as part of a global cost-cutting programme designed to halt a slide in profits. The company has attracted only 18,000 UK consumer customers since it launched two years ago and is considering scaling back its consumer and small business operations.

The UK telecommunications market has become increasingly competitive, with more than 150 competitors in different sectors. BT has cut its rates by 11 per cent over the last two years and by 34 per cent in the last five years. But while cable companies continue to draw customers away from BT at a rate of 25,000 per month, AT&T has failed to make significant inroads.

"We're taking further steps to reduce expenses and eliminate non-focus areas where we do not have an edge," said Phil Coathup, a spokesman for AT&T in the UK. "Our core business in the UK is based on providing services to multinational customers."

Both AT&T and BT declined to comment on reports that they plan to create a joint venture that would exploit the companies' international assets to target multinational companies. AT&T has tried and failed to make inroads into the international telecommunications market several times. In the 1980s it set up and pulled out of telecommunications manufacturing ventures with Philips in the Netherlands and Olivetti in Italy. It also pulled out of a joint venture with Telecom Italia. In 1996, it was ousted from a joint venture with Cegetel in France when BT bought a minority stake in the company.

In the UK, its progress has been slow, analysts felt. "I'm surprised they haven't done considerably better - BT saw their arrival here as a huge threat, that has failed to materialise," said David Fitzgerald, a partner at Andersen Consulting.

The company's UK revenues are pounds 400m this year, analysts estimate. AT&T is targeting revenues of $1bn by the year 2000.

Last week, the company sold Finance and Commerce, a software unit that sells to retailers such as Boots and financial companies, to Cap Gemini. It also sold an automotive software business, called Softlab, to BMW last month and prior to that it sold a healthcare software business to HBOC. They are businesses it bought when it acquired UK software and online services company, Istel, in 1989.

The US company has increasingly turned to the US market where a further round of deregulation in 1996 has unleashed a spate of mergers and acquisitions among telephone companies there and price cuts.

AT&T announced last week that 15,300 US managers, or 12.6 per cent of its work-force, will take early retirement as part of a job-cutting program that will slash 18,000 jobs or 14 per cent of its staff this year. That is part of an effort to cut $1.6bn out of general and administrative expenses from $14.9bn in 1997.

The company plans to reduce those expenses to 22 per cent of revenue by the end of 1999, from 29 per cent last year, bringing it in line with Sprint, the number three US long-distance company.

Copyright: IOS & Bloomberg