Ministers comment on xwave job reductions

Government is extremely disappointed that xwave is reducing its workforce in this province, Joan Marie Aylward, Minister of Finance and President of Treasury Board said today following xwave�s announcement that it is reducing its workforce in Newfoundland and Labrador by 42.

"The news is a particular disappointment in view of government having extended its information technology services contract with the company until March 31, 2007, a contract under which xwave made commitments for industrial benefits and new employment under a companion Industrial Benefits Agreement. Our overriding objective now is to ensure that these commitments are met in their entirety," she said.

Government was officially informed yesterday of the company�s decision to reduce its workforce in a face-to-face meeting with Frank Fagan, chief operating officer of xwave�s parent company Aliant; Keith Collins, vice-president, Newfoundland Region, xwave; and Harry Connors, Aliant�s vice-president of communications and public affairs.

Minister Aylward said: "xwave has agreed to prepare a remediation plan to demonstrate how it intends to fulfill its contractual obligations with government. Government will hold xwave fully accountable for its contractual obligations and will consider all options available under the contract to ensure an acceptable recovery plan is put in place and implemented."

Kelvin Parsons, Minister of Industry, Trade and Rural Development, said that under the Industrial Benefits Agreement, xwave committed to create a minimum of 100 new jobs over the life of the contract, 40 of which were to be created by the end of March 2003. "With the reductions announced today, and the eight announced last October, the company will be short on its March, 2003 employment target by 66 jobs," he said.

The company also committed to sub-contract $2 million in work annually to other IT companies in Newfoundland and Labrador. Minister Parsons said that xwave has had difficulty in meeting these targets to date as well, although it has put in place a remediation plan with Nati (the provincial IT industry association) to fully address its obligations in this area.

"The job losses now announced by xwave, following on remedial action it has had to take to address the sub-contracting issue, is serious cause for concern," Minister Aylward said. "While we understand that xwave has been impacted significantly by the global downturn in the IT industry over the past year, government�s overall responsibility to the public is to ensure the commitments made by xwave are fully met. It is incumbent on xwave to work with government and the local IT industry to see that this happens, and xwave has re-affirmed its commitment to do so."

Ms. Aylward said that in addition to ensuring that the contractual commitments are kept to assist in the continued growth of the IT industry, government also wants xwave to maintain a strong business and leadership presence in Newfoundland and Labrador. From its headquarters in St. John�s, the company remains one of the largest IT companies in Canada, with more than 2,500 employees serving clients in telecom, energy and select areas of the public sector. The xwave Newfoundland unit and its associated Ireland operations, which are managed from Newfoundland and Labrador, account for some 35 to 37 per cent of xwave�s core operations in terms of employment.

Mr. Parsons noted that until the recent downturn in the IT industry, xwave was successful in meeting its commitments. As well, since government�s initial contract with xwave in 1994, employment at the company�s St. John�s based operation has grown from 300 to 560 positions today, even after the reductions recently announced.

Until 1994, a publicly owned entity called Newfoundland and Labrador Computer Services provided government IT services. Government sold NLCS to NewTel that year for $9 million and a commitment from NewTel that the company would create new jobs and attract new business to the province, including subcontracted work to other local IT companies. This resulted in the creation of xwave.

Government renewed its initial 1994 seven-year contract with xwave in July 2001 for an additional term that will now expire on March 31, 2007. A comprehensive Industrial Benefits Agreeement was negotiated as part of the contract extension.

Media contact: Josephine Cheeseman, Communications (709) 729-0329

2003 01 10                                        2:15 p.m.