Telstra culls workforce to keep lid on costs

Telco giant Telstra is facing widespread scrutiny from unions, employees and customers after CEO Vicki Brady announced plans to cull up to 9 per cent of its workforce.

On Tuesday, Brady said that Telstra would make most of the job cuts by the end of 2024, saving the company $350 million as up to 2800 jobs are targeted in a bid to improve productivity.

“Some of the proposed measures, which require consultation with employees and unions, would result in up to 2800 job reductions from Telstra’s direct workforce,” the company said in a statement to investors.

Brady said the cuts would help the telco stay competitive and make the investments needed to support growth in data volumes across its business. She cited rising inflation and energy costs as factors behind the decision, as well as tough market conditions, but ruled out cuts to the telco’s consumer customer service team.

Instead, most affected workers will be from Telstra’s enterprise unit, which services some of the nation’s biggest companies with connectivity and security products. The unit has struggled amid competition from US-based technology giants such as Google and Microsoft.

A Telstra spokesman said the proposed workforce changes were unrelated to the telco’s use of AI technology.

Telstra had previously announced a full review of the unit after disappointing revenue in its most recent financial results.

“We have to make significant ongoing investments in our infrastructure, our technology and our services to deliver what our customers need today and into the future,” Brady said at a press conference at Telstra’s headquarters in Sydney.

“Certainly, there are parts [of the business] that are not delivering to expectations. We also haven’t been on track to deliver our cost-out ambitions. Higher-than-expected inflation and cost pressures, including energy costs, have made meeting this ambition more challenging.

“The actions we are announcing today are difficult, but they are necessary. We need to be a more efficient and sustainable business.”

Telstra shares fell 2.7 per cent on the news, closing at $3.57 per share.

Cuts ‘across the board’

It’s the first major redundancy round under Brady, who became Telstra’s chief executive and managing director in September 2022. Former chief executive Andy Penn axed nearly 2000 roles in 2021 as part of a years-long cost-cutting strategy.

Brady faced anxious staff at an internal all-hands staff meeting on Thursday afternoon in which she was asked if Telstra was putting profits over people.

“It is a question that comes up. And as we make difficult choices, we’re thinking about customers... We know how much individuals and businesses continue to rely on our connectivity and that requires significant investment,” she said in a recording of the meeting obtained by this masthead.

“About 80 per cent of Australians own an interest in Telstra, either directly in shares or through their superannuation.

“So there are a lot of people that also rely on Telstra to be sustainable and successful. And we obviously need their confidence, we need them to be confident that when they invest in us, they get a reasonable return.”

A source inside the telco not authorised to speak publicly said that the cuts would be made “across the board”, with sales, product and technology roles affected. Executive roles would also be cut by 15 per cent.

In a letter to Telstra staff seen by this masthead, Brady said that consultation on 377 proposed job reductions would begin immediately, with further details to be shared in mid-July.

“Some of our people will be impacted today, and others will be impacted in mid-July. I know this brings uncertainty, so please look after yourself and the people around you,” she said in the internal letter.

“I expect every function will be affected by the July changes, though to different degrees, and you have my commitment to consult with you as we propose changes.”

Pricing rethink

The telco on Tuesday also scrapped the annual July price rises of its postpaid mobile plans, which were linked to inflation. Analysts suggested that the measure would allow Telstra to follow the lead of rival telco Vodafone, which lifted prices above inflation in April.

“This approach reflects there are a range of factors that go into any pricing decision, and will provide greater flexibility to adjust prices at different times and across different plans based on their value propositions and customer needs,” Brady said.

Treasurer Jim Chalmers said it was important services did not suffer because of Telstra’s job cuts, labelling it a “very distressing day” for affected workers.

“We will be seeking advice from the ACCC [Australian Competition and Consumer Commission] about some of the claims that Telstra is making about their new pricing strategy and the role of the NBN,” he said at a Parramatta press conference.

“From our point of view, we want to make sure – and the budget was part of this – that, as our economy changes, that we get better at adapting and adopting technology, that our people are the big beneficiaries of those changes in our economy and in our technology base as well.”

Telstra’s job cuts are the first major redundancy round under Vicki Brady, who became chief executive in 2022.Credit: Kate Geraghty

Telstra has forecast a one-off restructuring cost of between $200 million and $250 million associated with the cuts. While Brady said affected workers would receive an “industry-leading redundancy package”, including career transition support for six months, Communications Workers Union’s national assistant secretary James Perkins called the cuts a “national disgrace”.

He said they would have a devastating impact not only on workers and their families but also on anyone who uses the telco’s services.

“You can’t slash thousands of jobs without seriously impacting the delivery of services across the country. Telstra has to answer to this,” he said.

“This has completely come out of the blue. There are going to be thousands of workers and their families terrified today about what this means for them and their future.

“Telstra workers deserve better than this and so do Telstra customers.”

Perkins added the union would be seeking meetings with Telstra on Tuesday and providing support to workers.

Luke Clifton, group executive of Macquarie Telecom, called the decision a “cheap, sinister move” that would worsen Telstra’s customer service standards.

“Telstra doesn’t believe in its staff or its customers – no wonder both are leaving in droves,” he said.

Telstra on Tuesday also reaffirmed its financial guidance, announcing that its underlying earnings before interest, tax, depreciation and amortisation in 2025 were predicted to be between $8.4 billion and $8.7 billion.

With Olivia Ireland

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