The management of OJSC Svyazinvest and the All-Russian Trade Union for Telecom Employees have worked out a set of joint principles on social security measures designed to protect telecom employees.  At present 382,600 staff are employed at Svyazinvest (as of January 1m 2002), and this issue is becoming increasingly important against the backdrop of the nationwide merger process and the conversion towards new standards of corporate governance.

The driving force which has led to increased ties between the management of Svyazinvest and trade union officials was the meeting of Svyazinvest CEO Valery Yashin and his deputies with representatives and secretaries of the All-Russian Trade Union for Telecom Employees.  The main issue on the agenda of this meeting was how to enhance the efficiency of telecom enterprises and form their 2002 budgets (business plans).

According to preliminary data for 2001, the holding company's sales revenue rose 22%, while its cost side, especially payroll, outstripped revenues.  The 37% growth in payroll, compared to only a 25% increase in revenues, has lowered the personnel performance index (down from Rub 5.1 to 4.6 per capita).  This in turn caused  payroll to increase from 19.7% to 21.7% with respect to earnings.

Over the past three years average monthly payroll has risen 2.5-fold, while revenues during the same period increased only 2.2-fold. These and other factors point to a decrease in the efficiency of telecom companies.

Dismissing 1.1 - 3.5% of Svyazinvest employees, the level necessary over the past three years, would not be in line with the needs of modern technology currently in progress.  The process of switching over from outdated 10-step and analogue telephone exchanges to digital technology will reduce payroll costs per unit of telecom services, which also means that staff will have to meet higher qualification requirements.  Moreover, the ongoing restructuring process will require terminating a larger number of telecom staff this year.

Trade union officials have said they are concerned about the 2002 macro-economic indicators for telecom companies, which could result in significant downsizing.  According to the Telecom Industry's Comprehensive Employment Program for Telecom Employees for 2000 - 2003, and the Social Security Program for Telecom Employees During the Merger Period (2001 - 2005), as well as Sector-Wide Tariff Agreements, terminating employees due to staff reduction is a last-resort measure to be taken when there are no other employment options left at telecom companies.

Moreover, despite considerable limitations applicable to the tariff growth of natural monopolies, deep debts payable, no financial ability to upgrade networks, top managers of telecom companies have been instructed this year to raise the average monthly payroll by at least 24%, which, in view of the inflation rate projected by the Ministry of Economic Development, would be no more than 10%.

Another issue raised was that of fixing a minimum salary for class-1 telecom employees in 2002.  Svyazinvest representatives have proposed a differentiated approach fixed on a regional basis, based on objective financial performance per company. This proposal is to be submitted for consideration to the RF Communications Ministry and the Central Committee of the All-Russian Trade Union for Telecom Employees.

In order to enhance the efficiency of joint activities, Svyazinvest management and the industry's trade union passed a resolution: 

• to set up a joint working group;
• to take measures as of 2002 to enhance the economic efficiency of telecom companies, given the low efficiency of tariff efficiency and the significant limitations on raising natural monopoly tariffs, as well as high debts payable and the need to upgrade networks;
• to involve trade unions in the operations of telecom companies aimed at working out the social aspects of organizational and technical measures under 2002 budgets, subject to approval by boards of directors, which include: consideration by the joint working group of a set of measures designed to enhance operations and optimize staff numbers, as a corrective action resulting from the results of 1Q 2002 telecom results;
• to work out standards applicable to acceptable staff numbers for the 2003 budget.

The management of OJSC Svyazinvest and the trade union see joint opportunities both on the federal level and with respect to the ongoing process, which involves the creation of mega-regional mergers.  Joint activities between Svyazinvest and the telecom industry trade union are expected to yield tangible results, as there are no serious controversies that would prejudice mutual business relations.