Spain-based telecommunications giant Telefonica SA (ES:TEF) is turning to employee reduction measures to reorganize its Spanish operations. As per UGT, a trade union, the company informed unions about its plans on December 4. The strategy would take effect by 2026 and could result in 5,124 job cuts. The company has started negotiating the layoffs with the unions. The next meeting is set for December 11.
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Job Cuts Amid Strenuous Times for Telecom Companies
Importantly, the job cuts would affect those with more than 15 years of employment history with the company and older than 55 years. The company cited “organizational, technical, and production needs” for undertaking the reorganization, the UGT spokesperson added.
The spokesperson also mentioned that Telefonica is most likely to shift the reorganized employees to other divisions by training them. This step will ensure that a lower number of employees are let off. Even so, the initial stats indicate that roughly one-third of Spain’s staff will be removed or reallocated during the process.
Telecom companies are resorting to cost-cutting and other strategic initiatives to streamline their businesses amid heated competition. Most companies are laden with huge debt, with the persistently high interest rate scenario adding more pressure to maintain margins. Despite the odds, TEF’s share price has gained 77.7% in the past month alone after exceeding earnings expectations in its third quarter Fiscal 2023 results.
Is Telefonica a Buy or Sell?
With one Buy, three Hold, and three Sell ratings, TEF stock has a Moderate Sell consensus rating on TipRanks. The Telefonica share price forecast of 3.69 euros implies 8.1% downside potential from current levels. Year-to-date, TEF shares have gained 20.4%.
