Government greed and naivety in the auction of third generation mobile phone licences has led to job cuts in the crisis-hit telecoms sector, industry experts have claimed.
Motorola announced this week it is to shut its Bathgate cellphone plant near Edinburgh, with the loss of up to 3,100 jobs. It blamed the decision on a global fall in demand for mobile phones.
Prime Minister Tony Blair, who made a personal plea to the company two weeks ago, branded the job losses ‘a bitter blow’, while foreign secretary Robin Cook accused the firm of creating a ‘human tragedy’.
But Nigel Dayton, analyst at Gartner, said is was ‘shocking’ that the government should complain about jobs losses among equipment makers, after squeezing £22.5bn from operators in the 3G licence auction.
This hit investor confidence in the sector and wiped large sums off firms’ market valuations. ‘Government greed and naivety has damaged the cellular industry, while the operators have to take some blame for getting carried away,’ he said.
The huge sums paid for licences across Europe caused a slowdown in spending that has hit equipment makers’ profits and forced them to cut jobs. ‘We must look at what can be done to stop the industry from imploding,’ Dayton added.
Veteran Labour MP Tam Dalyell, whose constituency includes the Bathgate plant, told The Engineer: ‘Western governments have milked these companies, so I don’t think they should be at all surprised that firms are forced into job cuts.’
Sucking money out
Conservative trade and industry spokesman David Heathcoat-Amory said the auctions had sucked money out of the telecoms industry. ‘Inevitably this has meant less money for investment.’
The Department of Trade and Industry has ruled out any rebate on the £22.5bn it made from the auction. A DTI spokesman said the high cost of licences had encouraged service providers to spend more with infrastructure companies, not less. ‘The industry, not the government, decided what to pay for the licences. Operators are still placing orders for 3G infrastructure, and aim to roll out 3G services as quickly as they can, to make returns on their investment.’
The government is to demand Motorola repays the £16.75m in regional aid it has received since 1995, arguing the company has breached the job creation conditions attached to the funding. Some money is expected to be spent helping the plant’s employees find work elsewhere.
Lack of consultation
Danny Carrigan, AEEU Scottish Regional secretary, said workers were angry at the lack of consultation offered by Motorola. ‘It has been a kick in the teeth for the workforce. The company has always refused to talk to us.’
David Marshall, organiser for the ISTC union, said workers were still stunned by the announcement, despite much previous speculation that the plant would close. Both unions have been in talks with Scottish enterprise minister Wendy Alexander about help for workers with retraining and job seeking.
The company’s semiconductor plants at East Kilbride and South Queensferry will remain open.
Marshall said the unions still had some hopes of keeping the plant open. ‘We have a three month consultation period, and will use it to the fullest extent.’
Motorola’s decision followed Ericsson’s conformation last week that it is to axe 12,000 workers worldwide. Ericsson chief executive Kurt HellstrÃ¶m said the company was cutting costs in face of ‘a general economic downturn and abrupt slowdown in the telecoms sector’.
Also, JDS Uniphase, which specialises in optical networking equipment, is to close its Bracknell, Oxford and Midlothian factories, with the loss of 515 jobs.
In contrast, Nokia announced year-on-year sales growth of 30% for the first quarter, with pre-tax profits up to £863m. It looks set to achieve a 40% share of the world mobile phone market, while Ericsson’s share has fallen to 10%.
More mergers are expected as smaller players combine to compete with Nokia. Ericsson has signed an agreement with Sony to develop handsets.