Network operators stand to significantly revise the talent makeup and costs associated with labor as they pursue network automation initiatives, according to new research from MTN Consulting. 

While these efforts have been underway for years, the rise of 5G deployments is driving a renewed focus on productivity gains as it relates to network operations, or opex, according to Matt Walker, chief analyst and CEO at the independent firm. 

Labor costs for the global telecommunication industry reached $292 billion last year, amounting to 23.1% of opex with roughly half of that money spent on technical staff, Walker wrote. About 30% of total labor costs in 2019 was spent on line, radio, and equipment installation and repair, while 20% went to computer, IT, and software development-related positions, he explained.

A shift to automation typically leads to job losses, particularly among employees that don’t have the skills or training required to perform more technical functions. AT&T, for example, cut its workforce by 7.6% in 2019 and previously noted that it plans to cut $1.5 billion in labor-related costs this year, backed by its SDN investments that have allowed the carrier to increase the use of automation to run its network.

T-Mobile US and AT&T both recently announced plans to slash thousands of jobs amid the ongoing COVID-19 crisis. The Communications Workers of America (CWA), which represents more than 150,000 AT&T employees, took particular umbrage with AT&T, claiming that the operator is pushing technical jobs to lower paid contractors that don’t have the same training or experience. AT&T has eliminated more than 41,000 jobs since 2018 and further cuts are expected.

“Automation doesn’t mean people will become obsolete, but it does mean a changing workforce,” Walker explained. “Telcos require different skill sets in employees nowadays, with software development and database administration more important (and more costly) than laying fiber and climbing towers. As 5G networks scale, and telcos look to a broad range of new services to deliver growth (or at least to stem revenue erosion), automation will remain key to their success.”

Total headcount on an industry-wide basis has been “relatively stable over the last decade, however, trends vary at the company and regional levels,” Walker wrote. Verizon’s workforce, for example, declined from 193,900 in 2011 to 135,000 at the end of 2019, but operators in emerging markets have rapidly expanded their respective workforces, he added. 

“The best telcos won’t simply cut staff blindly, but consider how to retrain and retain employees as new business opportunities emerge with the growth of 5G and cloud services,” Walker wrote. “The confluence of SDN, NFV, big data, and artificial intelligence technologies are enabling a whole new level of automation capabilities to be built into network solutions.”

MTN Consulting also calculated earnings per $1 spent on staff during 2019 among the largest 25 global operators and uncovered significant variances on that metric. Vodafone, at the bottom of the pack earned just $0.10 for every dollar spent on staff while Etisalat, a multinational operator with service in 15 countries across Asia, the Middle East, and Africa, generated $4.10 for every dollar spent on its workforce, according to the firm. 

Verizon snagged the No. 3 spot with $2 earned per $1 spent on staff and AT&T ran even, effectively generating $1 in earnings for every dollar spent in 2019.

“There could be reasons for this beyond management’s control. And clearly there are factors that affect earnings other than the raw dollar figure spent on staff,” Walker wrote. 

Interestingly and despite the rise of automation and resulting job losses at some operators, total labor costs as a percentage of opex slightly increased to 23.4% for the four quarters leading through the first quarter of 2020, according to MTN Consulting. However, those numbers don’t capture the impact of the global pandemic, which began to show up in more recent earnings and is evidenced by the U.S. posting record levels of unemployment beginning in March.