Concern at Telecom cutback

20:43, Feb 22 2013

The Engineering, Printing and Manufacturing Union is rubbishing a claim by Telecom boss Simon Moutter that the company's 7603 staff are philosophical about hundreds of job cuts.

Moutter announced yesterday that Telecom would axe hundreds of jobs this year and did not rule out more than a thousand jobs going. The cuts, across the board, will come on top of the net loss of 373 permanent positions at the company this year.

First NZ Capital analyst Greg Main said the cutbacks could continue for the next two or three years, but at some point Telecom would need to start thinking about how to reinvest and grow the business.

Moutter said he had discussed the cost-cutting drive with staff and "the general mood is that if we are going to do it, let's get on with it".

But EPMU organiser Joe Gallagher said Telecom's workforce was powerless. The union had only about 40 members at Telecom, many of whom kept their membership secret.

"If you are at Telecom and you have got no protection, you are hardly going to be debating with the chief executive on jobs, are you? In this climate, who is going to say: ‘Let's get on with it, make me redundant?'."


Labour communications spokeswoman Clare Curran said she accepted Telecom needed to restructure but she was concerned many more than hundreds of jobs might be on the line, once contractors were included.

"When you look at the economy at the moment, where are they going to go? The options are lower paid work, insecure work or leaving New Zealand."

While Telecom needed to "run the ruler" over its departments, the remuneration packages of chief executives in the public and private sector needed to be looked at, she said. Moutter is on an annual package of up to $4.7 million.

"I think the community is extremely cynical about the extremely high salaries that are paid to people at the top," she said.

Moutter said Telecom had significantly higher costs and employed more people than comparable companies in the telecommunications and information technology sectors. "Our higher cost base ultimately means we can't be competitive and offer products and services at a price and value that meets customers' needs."

Telecom had sacrificed profit margins but that was not a sustainable strategy, he said.

The company yesterday announced it had gained 103,000 mobile customers after launching competitive $19-a-month pre-paid mobile plans in August. It believed it had also arrested the decline in its 50 per cent share of the broadband market, adding 13,000 customers since greatly increasing data caps on broadband plans in September.

But broadband revenues still slid 15 per cent and fixed-line calling revenues dropped 12 per cent in the interim results.

The company's profits, adjusted for the spinoff of former network arm Chorus in 2011, rose 58 per cent. But Telecom cut its full year forecast for earnings before interest, tax, depreciation and amortisation to between $1.04 billion to $1.06b, reflecting the more competitive broadband market and a "softer" outlook for information technology services arm Gen-i.

Telecom had previously signalled a "flat to low single-digit percentage decline" from last year's interim adjusted ebitda of $1092m.

Moutter warned investors that Telecom would take a "material one-off charge" this financial year, after it spelt out details of the redundancies, and could face write-downs as it exited some parts of the market.

Main said Australian subsidiary AAPT was an obvious candidate for the chop: "The value of that business has got to be more to an in-country operator than to some foreign owner."

Merrill Lynch analyst Sameer Chopra said Telecom's performance in the mobile market had been a bright spot in its results.

Moutter appeared to rule out compensation for the recent malware attacks on its outsourced YahooXtra email service.

While frustrating for customers, "it is not really a compensation issue," he said. 

The Dominion Post