Ericsson Said to Weigh 1,000 Job Cuts After Italy Contract Loss

  • Reductions would be equal to about 25% of workforce in Italy
  • Company not picked to manage Hutchison-VimpelCom network
Photographer: Peter Kollanyi/Bloomberg

Ericsson AB is considering cutting about 1,000 jobs in Italy, about a quarter of its local workforce, after losing out on a contract to manage the country’s largest wireless network, according to people familiar with the matter.

The Swedish company wasn’t selected to merge and run the network of CK Hutchison Holdings Ltd. and VimpelCom Ltd., said the people, who asked not to be identified because the deliberations are private. The staff reductions are a result of the loss of the contract, valued at about $1 billion, the people said.

Hutchison’s 3 Italia and VimpelCom’s Wind Telecomunicazioni SpA received European Union approval in September for their merger, which will create Italy’s largest mobile-phone network. Ericsson currently manages Hutchison’s network and a part of Wind’s, one of the people said.

A representative of Ericsson declined to comment.

The loss of a big services contract in Italy puts further pressure on Ericsson’s incoming Chief Executive Officer Borje Ekholm, who will take the helm next month after spending a decade on the company’s board. Ekholm has been tasked with reviving the company’s fortunes after a year in which it has ousted one CEO as it struggles to adapt to lower demand for phone networks.

China’s ZTE Corp. is close to winning the contract from Hutchison and VimpelCom to combine and manage their Italian networks, people familiar with the matter said last week. Huawei Technologies Ltd. and Nokia Oyj also competed for the order, along with Ericsson, the people said.

Ericsson has been muddling through an industry slump that’s cut deeper than it expected as competition exacerbated a cyclical downturn. Phone carriers are curbing investments after spending billions of dollars building fourth-generation network systems so users can stream music and video on phones and tablets. Meanwhile, demand for next-generation, so-called 5G equipment, is yet to pick up as the technology isn’t ready yet.

Ericsson said in October it plans to cut 3,000 jobs in Sweden, a fifth of the workforce in its home country, and the company said earlier this month that 1,600 employees will leave through a voluntary reduction program, putting it ahead of schedule.

— With assistance by Niclas Rolander

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