Australian Telstra to axe 8,000 jobs

A Telstra store in Melbourne's central business district. Australia's dominant telco company announced plans to fire about a quarter of its workforce as part of a drastic new strategy to cope with an increasingly competitive industry.
A Telstra store in Melbourne's central business district. Australia's dominant telco company announced plans to fire about a quarter of its workforce as part of a drastic new strategy to cope with an increasingly competitive industry.PHOTO: AGENCE FRANCE-PRESSE

It is also considering sale of as much as $2b of assets in radical plan for telco company's future

SYDNEY • Telstra Corp said it will cut 8,000 jobs, potentially spin off a new infrastructure unit and consider selling up to A$2 billion (S$2 billion) of assets as Australia's largest telecommunications firm struggles with increased competition.

The former phone monopoly plans to cut costs by a further A$1 billion, taking savings to A$2.5 billion by fiscal 2022, chief executive officer Andrew Penn said in a statement outlining plans to simplify the business.

The warning sent its shares tumbling to a more-than six-year low of A$2.71.

Telstra employs 32,000 people across 20 countries, according to its recent annual report. Of the jobs to go, one in four will be executive and middle management roles.

"The rate and pace of change in our industry is increasingly driven by technological innovation and competition," Mr Penn said. "In this environment, traditional companies that do not respond are most at risk."

Telstra has lost more than half its market value since February 2015 as its high-margin, fixed-line access business migrates to a state-run network, and mobile-phone rivals eat into its customer base.

The company had its debt downgraded for the first time in 12 years last month by S&P Global Ratings, which cited its vulnerability to price and market-share erosion.

The company sees ebitda - earnings before interest, taxes, depreciation and amortisation - of between A$8.7 billion and A$9.4 billion in fiscal 2019, excluding restructuring costs of about A$600 million. That compares to analyst expectations of A$10.5 billion ebitda.

It will create the new, wholly-owned standalone infrastructure unit from July 1, with its own CEO reporting to Mr Penn. Called Telstra InfraCo, it is expected to control assets with a book value of about A$11 billion and have annual revenues and ebitda of A$5.5 billion and A$3 billion respectively.

Assets will include Telstra's high-quality fixed network infrastructure including data centres, non-mobile related domestic fiber and international subsea cables. Its services will be sold to Telstra, wholesale customers and the government-owned broadband network NBN.

BLOOMBERG, AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on June 21, 2018, with the headline 'Australian Telstra to axe 8,000 jobs'. Print Edition | Subscribe