Vodafone says major job losses not on cards

01:58, Jul 12 2012

Vodafone won't make large numbers of staff redundant if its merger with TelstraClear gets the nod from regulators, Vodafone New Zealand chief executive Russell Stanners has reassured the two firms' 3200 workers.

Australian-based telcoTelstra this morning announced it would sell its wholly-owned subsidiary TelstraClear to Vodafone for $840 million. 

Most analysts had tipped a price of about $400m to $500m, and Deutsche Bank analyst Geoff Zame said the higher-than-expected sale price suggested Vodafone saw potential for significant synergies and significant job losses could be in the pipeline.

But Stanners said Vodafone had the potential to save money by using TelstraClear's fibre-optic cable network to connect its cellphone sites, reducing its reliance on Telecom's network, and by using Telstra's New Zealand radio spectrum, most of it which would acquire under the deal.

He said there would be job reductions from pooling "back office functions" such as legal services, but these would not be large and instead the merger was all about positioning the firms for market growth.

"We see these businesses as very complementary. What you have got is the leader in mobile teaming up with the 'challenger' - the clear number two - in the fixed-line business, TelstraClear."


Vodafone said it expected to complete the purchase in the fourth quarter. It is contingent on approvals from the Commerce Commission, the Economic Development Ministry and the Overseas Investment Office.

Stanners said he would become chief executive of the merged business, but Vodafone and TelstraClear would probably operate as "standalone" businesses for about six months after the merger, and the full integration of the businesses - under the Vodafone brand - would probably take a further 18 months, meaning that would not be achieved until towards the end of 2014.

TelstraClear chief executive Allan Freeth promised the sale would not change the "quality products and services TelstraClear provides to its customers".

Nervousness about the implications of the takeover has been high among customers in Wellington and Christchurch, where TelstraClear operates its popular "triple play" home, broadband and pay-television cable networks, since the takeover talks were first revealed on June 5.

Freeth said Telstra would continue to serve trans-Tasman business customers "through a binding agreement with Vodafone New Zealand".

Industry analysts Paul Budde, Gartner's Geoff Johnson and IDC's Glen Saunders have speculated the sale of TelstraClear to Vodafone could pave the way for Telstra to make a bid for Telecom, however a clause in the takeover contract would prevent Telstra competing with Vodafone in New Zealand for an undisclosed period, meaning that could not be immediate.

Most stock market analysts, including Zame, remain dubious about the prospect of Telstra acquiring Telecom, though Zame acknowledged it was an option and Telstra's decision to sell all of TelstraClear to Vodafone, rather than retaining part of the business, perhaps made that more likely down the track.

Telecom shares slipped 1.5 cents following the announcement to $2.51.

Stanners said the acquisition would give Vodafone a "compelling set of products and capabilities for consumers and businesses, which will allow the company to innovate and grow, particularly as fibre rolls out across New Zealand".

Vodafone employs 1900 staff, TelstraClear 1300 and they together hold about 29 per cent of the retail broadband market, versus Telecom's 49 per cent.

Stanners said IDC Research estimated Vodafone and TelstraClear's total combined share of the fixed-line telecommunications market by customer numbers stood at 26 per cent. They have combined revenues of just under $2.4b.

TelstraClear does not own its own mobile network, which is likely to lessen competition concerns, but Victoria University academic Bronwyn Howell has said the aggregation of market share in the fixed-line market was likely to mean the Commerce Commission would need to take a proper look at the implications of the merger.