Vodafone NZ could become the next large company to lay off staff as Covid-19 pummels the economy.
A review has begun that an insider tells the Herald will lead to some degree of redundancies among its 2000 staff as the telco reviews costs across the board.
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It follows a move by rival 2degrees, which on Tuesday said it was laying off 120, or 10 per cent of its 1200 staff and slash costs.
At a briefing to Vodafone staff earlier today, chief executive Jason Paris said he and senior managers were taking a 20 per cent pay cut (rank-and-file staff salaries are unchanged). He also confirmed a salary freeze and a hiring freeze, bar customer-facing staff.
This afternoon, a spokeswoman told the Herald that Paris' comments also picked up on the market update that Vodafone NZ's 50 per cent owner Infratil made to the NZX last week, which included "some of the financial challenges the industry is facing from Covid-19, including that Vodafone NZ is undergoing a cost review".
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"That includes a reduction in capital programmes and deferral of non-essential spend, which has meant several capital projects have already been stopped and contractors notified," the spokeswoman said.
She also confirmed the executive pay freeze and hiring freeze, but added, "Beyond that, no other decisions have been made".
For Paris, it's his second major cost-review exercise since he became chief executive in late 2018. The first was to whip Vodafone NZ into shape ahead of an anticipated IPO, which was in the event headed off by Infratil and Brookfields' purchase of the telco for $3.4 billion.
There have been signs over the past week that pressure has been building for retail telcos.
Demand for phone and broadband services has been booming, but last week Paris explained his industry's bind:
"t's costing us a lot more to keep up with demand but unfortunately we've got a lot less [revenue] coming in due to all travel stopping."
The company's wholesale and infrastructure director, Tony Baird, confirmed that roaming revenue from Vodafone NZ customers using their phones overseas, and tourists coming into NZ, "is down 99 per cent".
Roaming revenue between Vodafone, Spark and 2degrees was $119 million last year, according to Commerce Commission figures.
Telecommunications analyst Peter Wise, principal at Ecosystem, told the Herald that while that number has to be put in the context of the overall size of the telco industry (Vodafone NZ's total revenue last year was $2 billion), it is a very lucrative niche - at it will hurt to lose it during an anticipated 12 to 18 months of tight border controls, at the same that other costs are mounting.
Vodafone, Spark and 2degrees have all agreed to provide all customers with unlimited fixed-line broadband data at no extra cost during the lockdown, plus measures such as pledging no disconnection fees, and no disconnections due to financial hardship over the months ahead - sparking a spat with Chorus over who will carry what share of the can for an anticipated "wall of bad debt."
In a trading update to the NZX last week, Infratil said the telco would suffer a "significant" roaming revenue hit, plus costs from lockdown measures such as temporarily winding down retail stores.
The Infratil update said Vodafone NZ's forecast full year ebitda is now expected to be towards the lower end of its guidance range of $460-$490m.
It said there would be no need for refinancing however.
While Vodafone has a number of positives during the pandemic, Infratil has other businesses in its group, such as Wellington Airport, its commercial property group and its retirement village division in Australia, that have blunter exposure to the outbreak.
Infratil shares were up 4.97 per cent to $4.65 in late trading, outpacing the NZX50's 3.08 per cent gain as the stock continued its sustained recover after a sharp knockback at he start of the lockdown. It is now up 0.65 per cent for the year.