'It weighs very heavily on me' - Telstra CEO feels for axed workers

Telstra chief executive Andy Penn has admitted his decision to slash one quarter of the telco's workforce "weighs very heavily on me", but defended the move as being in the best interests of shareholders, and the company, over the long term.

Telstra on Wednesday announced it would cut 8000 jobs from its payroll as it struggles with strong competition for mobile and internet customers as well as the impact of the NBN.

"It's been the most difficult part of everything we are doing. It weighs very heavily on me," Mr Penn told Fairfax Media at the company's annual investor day.

"I feel the weight of that responsibility very, very seriously. The impact on our people is absolutely the most difficult part of this, but if we are to be successful in the future, if we are to grow, if we are to respond to the advancements in technology …..these are the decisions we have to make."

Telstra had 32,293 employees at the end of the 2017 financial year.

Prime Minister Malcolm Turnbull said the job losses were "heartbreaking".

"The loss of so many jobs is very, very tough, heartbreaking news for the Australians, the Australian workers at Telstra ... that have been affected," he said.

The loss of so many jobs is very, very tough, heartbreaking news for the Australians, the Australian workers at Telstra.

Malcolm Turnbull

Union officials on Wednesday said the announcement represented one of the largest rounds of job cuts in Australian corporate history.

"Today's jobs purge is the low point of 20 years of privatisation, which has consistently taken the lower road of cutting jobs rather than investing in vital community infrastructure," Communications Workers Union national president Shane Murphy said.

"On behalf of Telstra workers and Telstra customers, I am calling on chief executive Andy Penn to reconsider this drastic action."

Mr Penn's plan aimed to placate disgruntled investors after a torrid period for Telstra, which has seen it shed more than $40 billion in market value since early 2015.

Telstra is cutting 8000 jobs as part of a new strategy dubbed Telstra 2022.Credit: James Davies

Asked whether the agressive cost cuts would be enough save his own position at Telstra, Mr Penn said:  "To be perfectly honest, I’m not focused on that."

"The only thing I am focused on is making the right decisions for the company, for our shareholders and our customers for the long term, and that’s what I will continue to do."

But the moves failed to restore confidence, at least in the short term. Telstra shares fell 14¢, or nearly 5 per cent, to close at $2.76, a 7-year low.

In a new strategy dubbed 'Telstra 2022", the company said it would increase its cost-cutting target from $1 billion to $2.5 billion over the next four years.

It will cut 9500 jobs, with between two and four layers of middle management layers to be eliminated. Telstra will also create about 1500 new roles in software engineering  and cyber-security.

Telstra has been languishing due to increased pressure in the ferociously competitive mobile market, and thinner than expected margins under the National Broadband Network.

Under its revamped strategy, the company will set up a new infrastructure unit, dubbed InfraCo, to house its network assets, data centres, international subsea cables, exchanges, poles, ducts and pipes.

Telstra raised the possiblity of a "de-merger" of InfraCo once the NBN rollout is complete in 2022. And Mr Penn refused to rule out selling the assets housed in the new unit to NBN.

"Well, that’s not our plan. But one of the things it does is create optionality," he said. "Ultimately, that’s a decision we will make at the time [in 2022]. Those decisions wouldn’t be taken lightly".

Telstra also flagged asset sales of up to $2 billion over the next two years to strengthen its balance sheet, although it declined to say which assets could be divested.

“The company is between a rock and a hard place" said Matt Williams, portfolio manager at Airlie Funds Management.

"The strategy enunciated today makes sense, but it involves a a lot of internal flux whilst the operating environment continues to get tougher for them. It's a difficult situation they're in in."

"In a perfect world it would have been better for this to have been done pre-NBN. But that’s in a perfect world."

Unions accused the company of putting "short-term profits above long-term services" for the Australian public.

"Telstra's decision to slash 8000 jobs will devastate thousands of Australian families and have a significant impact on Telstra's ability to deliver for consumers," Mr Murphy said.

"In an industry which is booming, Telstra has clearly chosen to prioritise short-term profits to keep shareholders happy, instead of investing in the future of Australia's network."

One Telstra employee contacted by Fairfax said it was an anxious time for staff as they awaited further details of how the massive restructure would affect their departments.

"It's quite a hit," the employee said. "There will be announcements all throughout this week and next week."

The initial focus will be on the reduction of executive and management roles, and the impact on customer facing teams will be minimised, Telstra said.

Amid calls from state governments for support, the company will spend $50 million on a "transitions program" for employees who are let go, and to train staff that are retained to work in a much leaner company.

The company expects to incur $600 million in restructuring costs due as a result of the new strategy.

Mr Penn said he was not solely focused on the Telstra share price. "The most important thing for me is to make sure we are making the right strategic decisions for the long term.

"I clearly care about what impacts the share price, I don’t spend every day following the share price. But I care about the share price because I know that it impacts our shareholders."