The announcement today is part of a raft of structural changes unveiled at the telco that have sent Telstra shares down more than seven per cent in early trade on the ASX, with the stock touching $2.70 at 1024 AEST – it’s lowest level since 2011.
Chief executive Andy Penn briefed staff about the job cuts today 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,” Penn told reporters.
“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.
The telecommunications giant employs just over 3000 staff in South Australia, including contractors.
Telstra says it has not yet made decisions about how the job losses will break down across its state offices, but Opposition Leader Peter Malinauskas is demanding immediate clarity for South Australian workers.
He said today that previous Telstra job shedding exercises had led to proportionate cuts of about 8-10 per cent in South Australia, so he was “extremely concerned” that hundreds of local workers would lose their positions.
“We know that this is inevitably going to have a significant impact on job numbers here in South Australia,” Malinauskas told reporters.
“I have already been in contact with senior officials within Telstra this morning to establish exactly what the job losses are going to be here in South Australia. And so far they have not been forthcoming in providing those numbers.”
He called on Premier Steven Marshall to make immediate contact with Telstra executives to determine the local impact and then develop a support program for retrenched workers.
Marshall said he had yet to speak with Telstra but he believed the announcement today would affect the state.
“We’re still trying to understand the full implications for South Australia,” Marshall said.
“Obviously it’s very disappointing news that Telstra will be very significantly reducing their workforce in Australia.”
He said the news made him more determined to drive down the costs of doing business in the state, including deregulating shopping hours and providing additional payroll tax relief to local businesses.
Marshall announced today that small businesses in South Australia would no longer be subject to payroll tax, under proposed new laws hoped to deliver more jobs and lower costs.
The legislation, to be introduced to parliament today, exempts the state’s 3200 businesses with taxable payrolls of up to $1.5 million from the tax.
Businesses with payrolls between $1.5 and $1.7 million are also set to benefit with a proposed reduction to the current regime. Under the new plan businesses with a payroll of $1.6 million would pay $24,750 as opposed to the current $49,500.
In May, Telstra warned that its 2017/18 earnings will 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.
Penn said the telecommunications sector had never been under more pressure, with the development of the NBN, significantly 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.
Penn said the current range of 1,800 plans on offer to business and personal customers would be slashed to 20 to help remove frustration many felt about issues including excess data costs.
“When I look at a lot of the activity in the business, it’s dealing with issues and complications and problems that we’ve created for customers because of the complexity in the design of the product,” he said.
“I should say we are prepared to give up more than $500 million worth of revenues in the sorts of charges that we know have frustrated customers for many years … but ultimately we believe that will drive more customers coming to Telstra.”
As part of its restructure, Telstra will set up a stand-alone $11 billion infrastructure unit, dubbed InfraCo, to help drive performance and set up investment options after the NBN rollout.
CMC Markets chief markets analyst Michael McCarthy said the restructuring plan may not be enough to please investors, who have watched Telstra’s share price nearly halved to just under $3 in the past year.
“Some investors think the Telstra patient needs radical surgery, and could view today’s measures as band-aids,” he said.
– InDaily with AAP
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