Telstra announces it will axe 8000 employees and contractors in company restructure

TELCO giant Telstra has announced it will be cutting almost a quarter of its workforce in a massive company overhaul, as shares drop to a seven year low.

TELCO giant Telstra has announced it will be cutting almost a quarter of its workforce in a massive company overhaul, with an aim to “eliminate customer pain points”.

CEO Andy Penn made the announcement this morning and said the decision was part of a plan targeting $2.5 billion in cost-cutting by 2022.

Telstra shares were down 16.5 cents, or 5.7 per cent, at a seven-year low of $2.745.

It was the most traded stock on the market, and one of the worst performers.

The telecommunications giant said it will cut 8000 employees and contractors — including one in four executive and middle management roles — over the next three years.

“I am acutely conscious the impact the loss of jobs has on our people and society,” Mr Penn said.

“But I need to be up front and transparent about the scale of the change needed at Telstra and what this means.”

MORE: Telstra outage disconnects thousands

Telstra CEO Andy Penn speaks to the media during a press conference at the Telstra Customer Insights Centre in Sydney. Picture: AAP/Peter Rae

Prime Minister Malcolm Turnbull responded to the job cuts, saying the loss of so many jobs was “heartbreaking news” for Telstra workers.

“It’s a reminder of why it’s so important to have a strong economy,” he told reporters at Parliament today.

Treasurer Scott Morrison said: “The government has been working hard to ensure the economy that they will go back into now to find another job, there are more jobs in that economy today than there were before.”

Mr Morrison said there were “brighter prospects” in the telecommunications sector than previously “but it still will be hard and it still will be an anxious time for those Australians.”

He said the government would continue redoubling efforts to create a stronger economy.

The Melbourne headquartered business is expected to be hit hard with the changes, which will cut employees and contractors and reduce two to four layers of management.

“That means there’s a strong focus on management and executive-type roles, particularly initially,” Mr Penn said in a press conference.

“Secondly, I would say there’s no particular bias towards onshore or offshore.

“We expect the balance to be broadly the same as it has been, as indeed between regional and metro.

Scott Morrison said it would be an “anxious” time for the working Australians. Picture: AAP/Lukas Coch

“As regards to the cost of the changes, we are announcing today a restructuring provision of around about $600 million, which will actually support some of the changes we need to make as well as the $50 million I mentioned in the transition program to support our people.”

At the end of last year the telco employed about 32,000 full-time positions.

The cuts come less than a month after 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 NBN.

Mr Penn said Telstra was already dealing with unions as the telco prepares for further fallout over the job cuts.

“Obviously the unions have a role to play in terms of representing their members. We are already engaging with the unions,” he said.

“That’s an important part of the overall process but what’s most important is feeling good about how we treat our people, and that’s been the number one focus for me and making sure we continue to treat them with respect and support them and at the same time do what’s right for the company.”

Telstra have not released details about which states will be hit the hardest.

Mr Penn said the strategy would eliminate “pain points” for customers, following several outages this year.

“We are now at a tipping point where we must act more boldy if we are able to continue to be the nation’s leading telecommunications company,” Mr Penn said.

“We will take a bolder stance and use the disruption in the telecommunications industry to lead the market for the benefit of our customers, employees and shareholders.

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

Communications Minister Mitch Fifield has been questioned about whether the government is concerned about the impact of Telstra’s job cuts on regional coverage and whether it will lead to more outages.

The Minister did not criticise Telstra for the move today but said the telco would “continue to be required to meet the customer service standards that they currently have”.

“It’s up to each telco business to make judgements as to the best way to meet the needs of their customers and the best way to satisfy their shareholders,” Mr Fifield said.

“Telstra have determined that this is the program that they will pursue to provide the service that their customers expect.”

Mr Fifield said it was a “difficult day” for Telstra staff and he had spoken to chief executive Andy Penn.

He said Telstra would be launching a $50 million transition program to assist affected staff.

On top of the cost cuts, Telstra’s new strategy outlines a goal to remain the premium telco brand and lead in 5G, the development of a new business unit to drive performance, and a radical transformation of customer plans and pricing.

Originally published as Telstra announces it will axe 8000 employees and contractors in company restructure