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Current as of 28/11/14 07:40PM NZST

Hamish Fletcher

Business reporter for the NZ Herald

Telecom to slash hundreds of jobs

Layers of middle management will be removed, says chief executive

Simon Moutter said that Telecom's higher cost-base meant the company could not be competitive. Photo / Dean Purcell
Simon Moutter said that Telecom's higher cost-base meant the company could not be competitive. Photo / Dean Purcell

Telecom's existing strategy is unsustainable and the company will go under the knife this year to remove "legacy culture" and "layers of middle management", says chief executive Simon Moutter.

Jobs are expected to axed "well into their hundreds" as the company continues to transform itself following its split with Chorus in late 2011.

Moutter yesterday outlined a number of concerns for Telecom, which reported adjusted earnings before interest tax, depreciation and amortisation of $506 million for a six-month period, up 3.7 per cent from the corresponding period the year before.

One worry was the high cost-base of the business and the fact Telecom employs more people than similar companies in the telco or technology sector. With 7,000-plus staff, the company has roughly 4,000 more employees than Vodafone and TelstraClear did when they merged late last year.

But Moutter said yesterday that jobs would be cut "in the hundreds" this year.

He would not give any more specifics on numbers but wouldn't "sugar-coat" the issue: "I'm not going to downplay the likely scale of these strategic changes nor sugar-coat the impact on a significant number of our people."

The Weekend Herald understands job cuts are likely to be a mixture of compulsory redundancies and non-replacement of departing staff.

Asked what areas of the company would be affected Moutter said: "There is no area of the business who has not been asked to look very hard at everything we do to make sure we remove the legacy culture, the layers of middle management, the duplication of effort."

Moutter said that Telecom's higher cost-base meant the company could not be competitive.

"We're keeping ourselves in the game with customers at the expense of margins but this is not a sustainable strategy," he said.

During the presentation of his company's financial results, Moutter said it was time for a Telecom to emerge that was different from the one that demerged from Chorus. He is due to deliver his full strategy for this transformation on May 16.

While announcing the job cuts yesterday, Moutter did say the company was in the "best shape to compete since 2004" particularly in the mobile market. Telecom had added 103,000 mobile connections since August and mobile usage revenue was up 4 per cent over the half year.

The company had added around 13,000 broadband customers in the six months, which brought its market share to around 50 per cent.

The company's adjusted first-half revenue of $2.1 billion was down 8.5 per cent on adjusted revenue from the same period the year before. It is paying an interim dividend of 8 cents per share.

It reported adjusted net profits of $156 million for the six months to December 31, up 57.6 per cent from the year before. Net profit after tax for the half was $163 million. The company stressed the comparisons with previous periods were complicated by the Chorus demerger.

Telecom's share price yesterday closed up 3.85 per cent at $2.29.

- NZ Herald

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