Hong Kong telecom carrier PCCW in a cost-cutting move has offered staff in some parts of the firm the option of setting up their own companies with contracts to do work for
The company did not say how many people would be offered the opportunity or how many staff members were expected to accept it. A spokeswoman for the company said that the cost savings would not be known till the number of employees accepting the offer would be known.
PCCW is facing competition in its core fixed-line business, as well, as a stagnant local economy. Many company watchers expect it to cut more jobs in addition to the 1,800 positions it has eliminated since June 2001. The company, which has about 13,500 workers, restated that it couldn’t guarantee that it wouldn’t cut jobs in the future.
"Those employees who wish to participate in the new start-ups will do so voluntarily and we expect many will embrace this initiative," Chief Operating Officer Mike Butcher said in a statement. PCCW said the contracting firms will be formed within the next six weeks and initially be given three-year contracts as preferred service providers, with guaranteed amounts of work.
The new companies, which PCCW will help start would be independent in terms of management and ownership, and can seek business from other firms, PCCW said. "I don't think it will have a big cost savings impact in the short-term," said analyst Bertrand Chui of ICEA Securities. "You still have to pay the subcontracting fees anyway."
Shares in PCCW, which plans to report interim results on Thursday, fell five percent on Monday to HK$1.33. The stock has lost some 38 percent this year, far worse than the 13 percent drop for the blue-chip Hang Seng Index, of which it is a component.