PCCW Ltd, Hong Kong's biggest phone company, has asked more than 2,000 workers to take a pay cut of as much as 20 percent as it moves them into a new network company to reduce costs.
Workers who don't accept the terms may be fired on Dec. 20, said Chan Wing Wa, the unit's managing director.
The affected workers represent about three-quarters of the 3,000 staff that PCCW plans to shift into Cascade Ltd, a new technical services unit.
The phone company, controlled by Richard Li, son of billionaire Li Ka-shing (李嘉誠), is trying to cut costs because its core fixed-line revenue is falling and it needs cash to pare US$4.2 billion in net debt.
"It's a good move to repair the company's financial position," said Ambrose Chang, who helps manage US$400 million of stock at Daiwa International Capital Management Asia.
"The company is feeding a huge workforce while facing difficulty in finding growth in its local market," Chang said.
PCCW shares fell as much as 3.7 percent. They traded at HK$1.32, down HK$0.03, or 2.2 percent, as of 12:29 p.m.
The phone company said the average salary cut will be "approximately 10 percent" and it will reimburse workers for the lost pay in the first year, with payments in January and September.
"There will be no alternative redeployment opportunities within PCCW for employees who choose not to accept the offer to join Cascade," the company said in a statement.
The plan for Cascade comes less than a month after PCCW turned 11 percent of its workers into subcontractors, reducing its workforce to 12,000 from 13,500. Unlike those workers, the staff who move to Cascade will remain part of PCCW.
The phone company has in addition fired about 1,858 employees since July 2001. Sales at its fixed-line phone business fell 9 percent in the first half of this year on increased competition and weak demand caused by Hong Kong's economic slump.
A "small number" of workers will be fired as a result of the creation of Cascade, Chan said, without elaborating.
"We won't accept any firing, and any salary cut will be opposed," said Leung Ting To, chairman of the PCCW employees' general union.
The union hasn't yet held a meeting of its members to discuss their response, he said.
PCCW expects the salary cut to reduce its own costs by 10 percent, Leung said, citing Chan.
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