MTS Allstream kickstarts Phase II transition with job cuts, saving $100 million

MTS Allstream is realigning its businesses to better position the telecommunications company for future growth. Dubbed Transition Phase II and announced on November 29, the plan entails cutting between 750 and 800 employees, a move expected to save the telecom provider $100 million a year in operating costs. But MTS Allstream is going to have spend approximately $100 million over the next two years in restructuring charges to be able to achieve those savings. The one-time regional incumbent telephone company underwent a restructuring last year when it acquired Allstream for $1.7 billion. That integration led to annual savings of more than $40 million. "The next phase of integration is really about ensuring we’ve got the right structure, market focus and resources in place to compete successfully," outgoing MTS Allstream CEO Bill Fraser said during a conference call detailing the restructuring. "The actions we are taking are going to bring our national and regional organizations together and enable us to operate more effectively and as a more unified force in the marketplace," he added. Phase II has three key elements: streamlining market focus, refining the product portfolio and improving the company’s cost structure. Fraser said that virtually every group within the company will be touched by this restructuring. On the market focus front, MTS Allstream plans to concentrate on the enterprise and upper-middle market, or larger mid-sized companies, said Fraser, adding the company will focus on expanding its "book of business with the targeted customer base." However, the company appears to be stepping away from the small- and medium-sized business (SMB) market despite a substantial number of SMB customers. "Changes are being made to enhance profitability from this segment," he said. MTS Allstream also plans to abandon unprofitable product lines and service offerings. "Quite honestly our approach in the past was too broadly based," Fraser said. "Service offerings are being honed and rationalized to align with our revamped market focus." Cost savings are the third key element of MTS Allstreams’ Transition Phase II and will enable the company to compete successfully going forward, he explained. "The principle driver of our cost alignment efforts is the further integration of the divisional structure into a single combined entity organized around customer segments to maximize our capabilities and to ensure our resources are tightly aligned with our market opportunities," Fraser said. The company is also paying close attention to the costs associated with managing its network. To this end, there will be "a renewed emphasis on revenues that are delivered on our facilities and where we need to lease facilities we will ensure we access the best alternative to deliver high-quality service on a cost-effective basis," Fraser said.

MTS Allstream kickstarts Phase II transition with job cuts, saving $100 million

News | December 8, 2005

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