Telstra fast-tracks job cuts, writes off $500m in assets

Telstra is fast-forwarding plans to axe thousands of jobs, with the telco set to offload 6000 workers by the end of June.

Telstra chief executive Andy Penn. Picture: Nathan Hopkins

Telstra is fast-forwarding plans to axe thousands of jobs, with the telco set to offload 6000 workers by the end of June.

The figure includes almost 4700 jobs it had already cut since June last year, as part of its plan to shed 8000 roles across the business by June 2022. The accelerated process, announced yesterday, will now see another 1300 jobs cut over the coming month.

Under its T22 strategic program, launched in June 2018, the telco will axe 9500 jobs but hire another 1500 roles, resulting in a net reduction of 8000 jobs

While the second round of job cuts was expected to be announced in the first half of fiscal 2020, Telstra chief executive Andrew Penn said speeding up the process gives it the best chance to become a leaner business.

“It’s really important for us to move forward and give the greatest certainty to our teams and our people,” he said during an investor call.

While the fast-tracked process will see Telstra complete approximately 75 per cent of the job cuts it previously flagged, Mr Penn warned there would be more jobs cut as Telstra continued to streamline its business.

“That’s not to say there won’t be role reductions in the future but that we will be able manage them more naturally,” he said.

$3.57 Telstra closed up 1¢ p

“We will continue to see role reductions as we replace our legacy systems, digitise and simplify how we work, and respond to things like declining NBN and call volumes, but if a final decision is made on the proposal announced today we expect the majority of our T22 restructure will be behind us.”

He added that Telstra would continue to employ more staff through third-party service contracts.

As Telstra starts discussions with employees and the unions the quicker pace of the cuts will push up its restructuring costs for fiscal 2019 by $200 million, from $600m to $800m. Employees getting the chop won’t be leaving the telco until early fiscal 2020, with consultation expected to conclude by the middle of next month.

Total remaining restructuring costs, after financial 2019, from T22 initiatives to be in the vicinity of $350m. It has left its guidance for fiscal 2019 intact, with its full-year income to come in the range of $26.2bn to $28.1bn.

Separately, Telstra also announced it would record $500m in impairments in its full-year 2019 results as it writes off legacy IT assets. The impairment stems from Telstra’s announcements in 2016 to replace old back-office technology, including provisioning and billing systems.

“One of the things we are doing with our digitisation program is replacing our business IT stack,” Mr Penn said.

“We are in the process of launching our new radically simplified product propositions onto the technology stack, we have implemented the core technology architecture and are now building out the features and the functionality.”

Even with the T22 program on track, Mr Penn said Telstra’s costs were still going up.

“We don’t expects total costs to be flat year-on-year in FY19. One of the big drivers of that is handset prices, which are up materially as a consequence of exchange rates and where the providers are moving their prices.

“While our costs will be up year-on-year, a lot of that will be from the first half of the year rather than the second,” he added.

Telstra shares closed yesterday 0.2 per cent higher at $3.57. The telco’s shares have gained 25 per cent so far this year, but are still trading 46 per cent below the 18-year high of $6.61 in January 2015.