Telstra sharpens the axe

Telco giant’s shares plummet on news of job cuts

TELSTRA is axing 8000 jobs over the next three years as it tries to save $1 billion while tackling the cost of investing in new technology and increased competition from its rivals.

The announcement yesterday morning is part of a raft of structural changes unveiled at the telco that sent Telstra shares down more than 7 per cent in early trade on the ASX, with the stock hitting $2.70 – its lowest level since 2011 – before eventually closing at $2.77.

Chief executive Andy Penn (pictured) briefed staff about the job cuts yesterday ahead of a planned investor briefing about a major restructure that will focus on simplifying product range in an attempt to attract more customers.

Telstra will axe one in four of its executive and middle management jobs and consolidate its back office operations as it cuts 8000 employees and contractors over the next three years.

“We have to do this because I think as an industry we’re at a tipping point,” Mr Penn said.

“I think the current nature of telecommunications products and services is unsustainable and it has to change and we at Telstra are going to lead that change.”

Telstra will set up a $50 million support program to help staff affected by the job cuts with post-employment support, training and coaching.

In May, Telstra warned that its 2017-18 earnings would likely be at the bottom of its guidance range of $10.1 billion to $10.6 billion, blaming increasing competition in mobile and fixed broadband, and rising costs from the national broadband network.

While the telco is sticking by that forecast, it now expects a fall in earnings for 2019 to between $8.7 billion and $9.4 billion – excluding restructuring costs of about $600 million.

Telstra expects its earnings to be affected by the increased rollout of the NBN in 2019, but believes it can save an extra $1 billion from improved productivity as a result of its restructure.

Mr Penn said the telecommunications sector had never been under more pressure, with the development of the NBN, significant increased competition, and huge pressure to invest in new technologies.

Under the restructure strategy – dubbed Telstra 2022 – the telco aims to simplify and change the nature of the range of telecommunications products and services for customers.

Mr Penn said the current range of 1800 plans on offer to business and personal customers would be slashed to 20 to help remove frustration felt about issues including excess data costs.