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Ben Kwok

Pacific Century CyberWorks hopes yesterday's 500-plus job cuts will save the company HK$190 million per year in staff costs.

The largest telecoms operator in Hong Kong said it would immediately freeze salaries and head counts for the next year to lower operating costs.

However, it said it could not give assurances there would be no further redundancies.

Yesterday's announcement that the company will cut 506 jobs, or 3.4 per cent of its 14,000 workforce, brings the number of job losses there to almost 1,000 this year.

In the summer it laid off 340 at its internet company Now.com, and in October it laid off 108 at Adsociety, an online advertising subsidiary.

A letter sent by chairman Richard Li Tzar-kai to all staff yesterday claimed the redundancies were a direct result of the extremely difficult economic situation in Hong Kong and globally, and the intense competition within the industry since the implementation of the current regulatory framework.

A senior executive at CyberWorks said regulations by the Office of the Telecommunications Authority (Ofta) had not created a 'level playing field' for the company and had consequently hurt its business.

'We have told our staff that as the business environment has changed, we have to change ourselves in order to be competitive,' he said.

In response to the regulatory claim, Au Man-ho, senior assistant director of Ofta said the layoffs were a commercial decision by CyberWorks and had no relation to government regulation.

'They should not confuse layoffs with competition,' said Mr Au, 'Their layoffs will not affect the Government's decision to encourage competition, which is good for Hong Kong as a whole.'

PCCW-HKT, a CyberWorks fixed-line operation, still has about 90 per cent of the fixed line market, and CSL - the mobile joint venture with Telstra - has about 20 per cent of the mobile market.

The layoffs were carried out across the board in almost every division and affected staff at various ranks from divisional general managers to clerical staff and had been a difficult decision, the CyberWorks executive said.

However, he denied the layoffs were a signal to the market that CyberWorks would report lower profits this year.

The layoffs, which followed similar moves by blue-chip companies such as Hutchison Whampoa and Henderson Land came after a series of analysts downgraded their earnings forecasts for CyberWorks.

Deutsche Bank downgraded its profit forecast for CyberWorks yesterday by 44 per cent to HK$939 million, from the previous HK$1.78 billion, because it said CyberWorks was facing competitive pressure in its core fixed-line business and sub-sea cable joint venture, Reach. Goldman Sachs also cut its profit forecast for CyberWorks to HK$1.46 billion.

The CyberWorks executive said the company would need to make a HK$78 million provision for this retrenchment which would eventually save it HK$190 million a year.

Analysts welcomed CyberWorks' latest restructuring. CLSA analyst Stephen Leung said although the cost saving was minimal, compared with an estimated HK$3 billion annual payroll, the layoff news should be positive for CyberWorks.

'It showed that management is living up to their promises of first doing refinancing and second, cost savings,' Mr Leung said.



CyberWorks cuts 506 jobs to save $190m