Telstra to axe 2800 workers, or 9pc of workforce as part of $400m cost cuts

Australia’s biggest telco says job cuts are critical to make ‘necessary investments’ in data and internet use across the country and meet its $400m cost saving goals.

Telstra CEO Vicki Brady has attempted to cauterise the fallout by announcing the telco — which employs about 31,000 people — would not be making any price rises. Picture: John Feder

Telstra will axe up to 2800 jobs — or about 9 per cent of its workforce — as it races to achieve its ambitious cost savings as part of its much-hyped T25 strategy and struggles to compete with bigger technology companies as they woo the telco’s lucrative enterprise customers.

The nation’s largest telco is cutting heavily into its enterprise business, which services a number of ASX200 companies, big banks and government providers and has signalled it would potentially offload some of those customers to other players.

Telstra’s enterprise arms, which includes its Telstra Purple business, are one major area of the business where the telco still uses offshore teams. In recent years, it has returned its customer service call centres for consumers and small business customers onshore.

The redundancies come days after Telstra partnered with Indian technology giant Infosys to automate more engineering tasks.

But, the telco said the job cuts were not part of its push into artificial intelligence, despite one senior telecommunications industry rival branding it a “sinister move”.

Chief executive Vicki Brady says the cuts were necessary to ensure “Telstra could continue to make the investments needed to support the ever-increasing growth in data volumes on its networks and deliver improved connectivity for customers across the country”.

“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,” Ms Brady said.

Telstra was now focusing on where it could “differentiate” itself from competitors and would “look to streamline our network application and services portfolio”.

“Part of that work, we may well partner with other players in the market to be able to provide those services. We may transition customers to other players that can provide some of those more specialised services,” she said.

Telstra has gone virtual in hands-on training for its field workers. Picture: Sarah Reed

The telco would also look to modernise some of the enterprise products and services it kept, and it would have a heavy focus on managing the transition for customers it passed on to competitors, Ms Brady said.

The cuts would cost the telco between $200m to $250m, with the telco confident its severance packages were some of the best in the industry.

“The redundancy provisions vary depending on years of service. Our package is in fact better than the standard, significantly better, and is industry leading, and that’s been a part of our enterprise agreement terms and conditions,” she told The Australian.

Ms Brady admitted that some parts of the wider Telstra business weren’t performing and the company would focus on the basics as it looks to “simplify” its offerings.

“(We are) beginning the reset of our Telstra Enterprise business by simplifying our operations and improving our productivity,” she said.

“Our industry and the world we are operating in is fast changing and we have new and different competitors.”

She signalled Telstra’s enterprise business now faced a number of new competitors and the company would be better off focusing on mobile and the ever-growing demand for data.

Telstra’s investment in infrastructure, technology, innovation and service “drives growth and underpins Australia’s digital economy, contributing to the prosperity of the nation,” Ms Brady said.

Tuesday “was a very hard day” and Telstra acknowledged the cuts arrived amid a difficult time.

“This is occurring within a dynamic environment, with an evolving competitive landscape, rapid advances in technology, changing customer needs, and the ongoing inflationary pressures facing all businesses.”

The Australian has confirmed Telstra’s job cuts will impact both local and overseas workers employed by the telco. A spokesman told The Australian no local jobs would be replaced with offshore roles.

“The proposed changes announced today are intended to simplify our operations and improve productivity across the entire business, creating a smaller, more focused company. This means there will be a number of job impacts across many different locations both in Australia and overseas,” he said.

The cuts would largely affect its enterprise business but also have some impact on its global business service, InfraCo and its product and technology team.

Ms Brady attempted to cauterise the fallout by announcing Telstra — which employs about 31,000 people — would not be making any price rises linked to inflation to its postpaid mobile plans, with hikes normally happening in July. She also reaffirmed the company’s full-year earnings guidance.

“Our mobiles business continues to perform strongly, with growth in subscriber numbers for the first four months of this half consistent with the first half of FY24. This success has underpinned our EBITDA growth in FY24 to date and reflects the high demand for our products and the value customers place on our differentiated network, its reliability and our flexible plans.

“We will continue to review our pricing and any changes will be communicated to customers in a timely and transparent way.”

Ms Brady flagged potential redundancies at the telco’s half-year earnings in February. Then, she revealed Telstra had achieved about $105m, or 20 per cent, of the savings outlined in its T25 strategy.

But, Ms Brady was adamant the company could deliver most of the remaining $400m in the next 18 months. Most of this will come from the job cuts, which Ms Brady said on Tuesday would achieve $350m of Telstra’s T25 savings.

In the past several months, Telstra has been reviewing the cost base of the Network and Services business, which Ms Brady said was “clearly a long way from where we need it to be” after it delivered flat half-year revenue at $1.35bn. NAS provides Telstra’s enterprise customers with network security and cloud services, among other products.

The job cuts are expected to be completed by the end of this calendar year. Ms Brady said staff consultation on 377 of those roles would begin immediately, mainly from areas supporting the products and services in its enterprise division. She said the redundancies would “reshape” some of Telstra’s internal operations by moving its global Business Services function into other parts of the business.

“This will help simplify processes and empower leaders closest to customers to make more decisions.”

The cuts come days after Telstra announced a new partnership with Infosys to ramp up its use of AI and slash the number of its main tech vendors from more than 40 to two.

Telstra product and technology executive Kim Krogh Andersen told The Australian he needed the Infosys deal to meet the T25 goals.

But, Mr Krogh Andersen said the Infosys partnership was not purely about outsourcing, and Telstra aimed to build more internal capability to “own more of its own destiny when it comes to software”.

“We already have more than 70 per cent of the workforce in IT done by partners today. It’s about ensuring that the work is done more efficiently and in a strategic mindset instead of a time and material delivery mindset,” Mr Krogh Andersen told The Australian from Bangalore last week.

“We still have an ambition to insource more, and that’s something we are doing in parallel with consolidating partners.”

Telstra workers out in the field.

Telstra has deployed AI across half of its operations as part of its T25 strategy to become fully AI-enabled in coming years.

It is using the technology to better detect and fix network faults, rather than engineers poring over lines of code, and to increase efficiency and customer satisfaction across its call centres. The telco’s employees can ask the AI to provide a “one sentence summary” gleaned from customer notes and previous interactions, reducing the need for customers to repeat information, avoiding unnecessary frustration.

Macquarie Telecom group executive Luke Clifton criticised the redundancies, which came five days after Telstra announced its partnership with Infosys. Macquarie Telecom ditched Telstra in March 2021 after signing a $34m exclusive deal with Optus to deploy mobile services including 5G to its 100,000 business customers.

“Telstra has never believed in investing in Australian people. It has outsourced staff overseas, and now it’s trying to replace them with AI. Rather than taking the lead on investing in AI to support staff and create better technologies for customers, the company is making a cheap, sinister move that will worsen its already disgraceful customer service standards,” Mr Clifton said.

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

On Tuesday, Ms Brady reaffirmed Telstra’s full-year guidance of generating earnings before interest, tax, depreciation and amortisation of $8.4bn to $8.7bn.

“Our continued confidence in our capacity to grow mobiles’ revenue and EBITDA, along with clear actions on cost out and to reset our Enterprise business, has allowed us to bring forward our underlying EBITDA guidance for FY25,” Ms Brady said.

Ms Brady said Telstra was just over 12 months from completing its T25 strategy and good progress had been made in a range of areas, including improving customer experience.

“Our strategy beyond T25 will build on the momentum created over recent years and help set the organisation up for success through to 2030.”