AT&T’s six-year effort to virtualize its core network functions with SDN and other technologies is poised to lead to dramatic job losses this year. The company today said it plans to cut $1.5 billion in labor-related costs in 2020.

While some of those job cuts might occur in AT&T’s entertainment or TV divisions, mobility remains its largest business and one of the biggest benefits of SDN is automation — a bonafide job killer in any industry.

“With that move toward SDN, the labor reductions are substantial,” said Roger Entner, founder and lead analyst at Recon Analytics. “If you go SDN, your workforce is extremely scalable because everything becomes super straightforward and automated.”

He noted that Rakuten Mobile, which is building a fully virtualized, cloud-native greenfield network, plans to run its network with an engineering staff of about 220 people. AT&T’s network engineering team numbers are much greater, perhaps as high as 100,000 people, according to Entner.

The company ended 2019 with 247,800 employees, which marks a 7.6% decrease from the year prior. It plans to continue cutting at least 6% in costs on technology operations overall.

“AT&T will not get to 200, but when you look five years, 10 years out, half if not more of these people are gone,” he said. “By going SDN these very big network operations are becoming extremely efficient to run, and that means unfortunately jobs… The wireless industry is, at least on the operational side, getting smaller and smaller because of SDN.”

AT&T’s No. 1 priority in 2019 was to pay down its mountain of debt and CEO Randall Stephenson said it “met or exceeded” that objective. “We have now reduced net debt by about $30 billion since we closed Time Warner,” he said during the company’s Q4 earnings call.

AT&T acquired the entertainment juggernaut for $85 billion in June 2018, and it reduced net debt by $20.3 billion in 2019. AT&T hasn’t changed its strategy much during the last year, but it faced growing pressure when an activist investor firm lobbed a scathing letter in September calling for a change in leadership amid “long-term underperformance” and a “series of strategic setbacks.”

Following that broadside, Stephenson described the series of demands as a “mixed bag,” but noted that many of those efforts were already underway. Less than a month later, AT&T sold its wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands for $1.95 billion.

The company set out to achieve a net monetization goal of at least $6 billion in 2019, but today reported that it tripled that amount to $18 billion by the end of the year.

Meanwhile, AT&T continues to push forward on its plan to deploy 5G. “Our network covers 50 million people today, and we expect to have nationwide 5G coverage in the second quarter,” Stephenson said.

Company executives also lauded the performance of its 5G network compared to its competitors and said its spectrum holding position will continue to fuel benefits for its network and customers. “Our strong spectrum position gives us a leg up and allows us to execute a different 5G deployment strategy than our competitors. We have the low- and mid-band spectrum to deploy 5G nationwide,” said John Stankey, president and COO at AT&T.

“We also have the millimeter-wave (mmWave) spectrum we need to deploy 5G+ and its gigabit speeds and super-low latency to more densely populated cities. We’re in 35 cities today, we’re adding more this year,” he said.

“Last year was a year of us getting macro coverage in place,” Stankey said, adding that 2020 will focus on improving indoor coverage and the network’s cumulative square miles covered. He also downplayed the near-term potential for fixed wireless.

“We’re not as optimistic as maybe some are on what I would call the fixed wireless replacement construct,” he said. “I think that’s going to take a couple years to emerge.”

Analysts at MoffettNathanson reiterated concerns about AT&T’s performance on premium TV, but maintains that the company “finds itself in what is perhaps its strongest competitive position in years.” Some of that is driven by AT&T’s spectrum position, which it described as a “healthy mix” and “much more balanced than Verizon’s.”

AT&T missed Wall Street’s fourth-quarter revenue 2019 estimates, largely because of a continued decline in DirecTV subscriptions. The company has a lot riding on its plan to launch its own streaming platform HBO Max in May.

Revenue fell 2% to $46.8 billion and net income declined 13.6% to $5.3 billion during the quarter. Capex was also down nearly 6.4% on an annual basis to $19.4 billion for 2019. Revenue at AT&T's wireless business grew nearly 0.8% during the quarter to $18.7 billion.

Smartphone upgrades were also at a record low during any quarter in AT&T’s history, but it expects that trend to reverse at the end of 2020 when more 5G devices come to market, Stankey said. “We are expecting an increase or a step up in what’s occurring.”