Telstra’s ‘massive change’ has ‘blindsided’ workers, but will it pay off for customers and shareholders?
- by Admin
- May 20, 2024
Telstra has revealed plans to sack up to 2,800 workers as part of its latest cost-cutting measures.
The telco said the majority of the job cuts would happen by the end of this year.
Telstra had more than 31,000 employees at the time of its last annual report in August 2023, meaning that the job losses represent roughly 9 per cent of its workforce.
“I appreciate the uncertainty proposed changes like this can create for our people and we will support them through this change with care and transparency,” said Telstra’s chief executive Vicki Brady.
“As we propose specific changes, we will talk them through with our teams and union representatives first.”
In a statement to the ASX, Telstra said it would begin consultation on 377 of those affected roles with unions and the relevant teams immediately.
Communication Workers Union (CWU) national assistant secretary James Perkins said staff representatives had no prior warning of the planned lay-offs.
“We were absolutely unaware and we’ve been blindsided by this decision,” he told The World Today.
“We cannot possibly see how Telstra can go on maintaining the level of service it needs to satisfy its customers’ expectations when you’ve just cut another 9 per cent of your workforce.”
Telecommunications management and business consultant Paul Budde said job cuts were not a surprise, but the scale of them was.
“It’s not just a matter of continuing to fine-tune or readjust — this is a massive change,” he told ABC News.
These roles are within Telstra Enterprise, which provides communication services to big businesses.
“As we look to streamline our network application and services portfolio, as part of that work, we may well partner with other players in the market to be able to provide those services,” the Telstra CEO told reporters.
“We may transition customers to other players that can provide some of those more specialised services.”
Telstra drops inflation-linked mobile price rises
As part of the redundancy announcement, Telstra also revealed that it would drop controversial inflation-linked price increases from its post-paid mobile plans.
Ms Brady said that meant there would be no price rise on July 1.
“We will not be making pricing changes in July for our consumer post-paid mobile plans,” she told reporters.
“Our pricing review continues, as you would expect, across all of our products.”
UBS telco analyst Lucy Huang said that may not end up being good news for customers, as inflation kept falling.
“TLS (Telstra) suggests this gives them more flexibility on pricing review (e.g. Vodafone put through higher than CPI linked price increases in late Mar/early April this year),” she wrote in a short note reacting to Telstra’s announcement.
Barrenjoey analysts Eric Choi and Annie Zhu agree.
“Investor feedback had suggested TLS could have the ability to push prices up by more than CPI – we therefore theorise TLS could be delaying price increases in FY25 (but eventually announce increase greater than CPI),” they wrote.
Ms Brady also said the redundancy program would not negatively affect retail customer service.
“We have invested significantly in our customer service over recent years. That includes onshoring our call centres for consumer and small business customers,” she said.
“It includes buying back our stores to deliver consistently good experience. None of these changes impact those commitments.”
However, Mr Budde said even if the quality of service does not deteriorate further, it is still lower than in the past.
“I think we, the customers, have been conditioned to a lower level of customer service over years because of the robots and call centres and things like that,” he argued.
Treasurer Jim Chalmers said it was a “very distressing day” for affected staff, and that the federal government would be closely watching Telstra’s pricing policies.
“We will be seeking advice from the ACCC about some of the claims that Telstra is making about their new pricing strategy and the role of the NBN,” he told reporters at a press conference.
‘Ongoing work to reduce costs’
Ms Brady said details of the further job cuts would be announced over the next couple of months.
“We will continue to work through the detail as fast as we can on the remaining proposed changes and I anticipate being able to update our employees around mid-July,” she told reporters at a press conference.
“As part of our ongoing work to reduce our costs, we will also focus on other cost categories including non-labour-related costs.”
Mr Budde said Telstra is struggling to raise additional revenue, leaving cost-cutting as its main means of profit growth.
“The reality is that telecommunications is a utility, yeah? The value-add is going to the digital companies,” he explained.
“Revenue is flat — 1 per cent up, 1 per cent down on an annual basis — at the same time, costs are rising 10 per cent to 20 per cent over the last year alone.
“So you really see this dramatic change in cost-cutting in order to ensure that the company remains viable, that it can deliver profits.”
Mr Budde said some of the potential future areas to cut costs involve cooperation with other telcos and the increasing use of AI.
“We might see more network sharing to cut costs in that particular area,” he speculated.
“Artificial intelligence will be a hot topic because it can streamline the company, it can streamline customer services.
“So they will invest more in technology rather than in people.”
Telstra hopes to save around $350 million a year in costs by the end of next financial year, but anticipates between $200-250 million in restructuring costs related to the redundancies.
The telco has told investors it expects to make an $8.4-8.7 billion pre-tax, pre-interest profit (EBITDA) in financial year 2025.
They were not impressed, with Telstra’s share price down 1.9 per cent to $3.60 shortly before the close of trade.
Posted , updated
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