Finance Finance News Telstra shares plummet over ‘heartbreaking’ job cuts

Telstra shares plummet over ‘heartbreaking’ job cuts

telstra jobs
Telstra chief Andy Penn says the cuts will position the company for the future. Photo: AAP
Twitter Facebook Reddit Pinterest Email

The loss of 8000 jobs at Telstra is “heartbreaking news”, Prime Minister Malcolm Turnbull says.

The telco announced on Wednesday it will axe one in four executive and middle management jobs and consolidate back office operations as part of a radical plan to cut 8000 employees and contractors over the next three years.

It will also target a further $1 billion in cost cutting by the 2022 financial year, and will split its company into two separate entities, one for retail and the other to manage its substantial infrastructure assets.

“The loss of so many jobs is very, very tough, heartbreaking news for the Australian workers at Telstra,” Mr Turnbull told reporters.

He said having a strong economy means there is a demand for skilled workers, and he hopes they will find new jobs in the “dynamic” telecommunications sector.

Opposition Leader Bill Shorten said it was tough on workers who have been with the company for years.

“We want to make sure people aren’t treated as being thrown on the scrap heap,” Mr Shorten told reporters.

telstra jobs
In addition to job cuts, the telco will also split into two separate companies. Photo: Getty

Telstra chief executive Andy Penn said the job cuts were unavoidable because “as an industry we’re at a tipping point”.

“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,” he said earlier on Wednesday.

Mr Penn’s announcement was 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. The stock touched $2.70 at one point – its lowest level since 2011.

“In the future our workforce will be smaller, knowledge-based one with a structure and way of working that is agile enough to deal with rapid change,” Mr Penn said.

“This means that some roles will no longer be required, some will change and there will also be new ones created.”

The cuts come less than a month after 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 NBN.

“The rate and pace of change in our industry is increasingly driven by technological innovation and competition,” Mr Penn said.

“In this environment traditional companies that do not respond are most at risk,” he added.

“We have worked hard preparing Telstra for this market dynamic while ensuring we did not act precipitously. However, we are now at a tipping point where we must act more boldly if we are to continue to be the nation’s leading telecommunications company.”

Telstra on Wednesday forecast a fall in earnings for 2019 to between $8.7 billion and $9.4 billion – excluding restructuring costs of about $600 million.

The other major aspects of Mr Penn’s plan are up to $2 billion in asset sales over the next two years and the structural separation of Telstra into “InfraCo” and retail businesses from July 1.

The stand alone $11 billion infrastructure unit, InfraCo, would have its own chief executive reporting to Mr Penn and help drive performance and set up investment options after the NBN rollout.

The Communications Workers Union said the cuts would affect Telstra’s ability to service clients, particularly those in regional areas.

National president Shane Murphy said the decision would devastate thousands of Australian families and compromise the telco’s ability to deliver services.

“In an industry which is booming, Telstra has clearly chosen to prioritise short-term profits to keep shareholders happy,” he said.

“This is a recipe for reduced services, with Telstra’s highly skilled workforce of employees and contractors replaced by casuals and piece-workers.”

Mr Murphy said the jobs purge represented one of the largest ever undertaken in Australian corporate history and was a low-point since Telstra’s privatisation 20 years ago.

-with agencies

View Comments