Telecom to cut hundreds of jobs

Last updated 12:35 22/02/2013
JOB CUTS: Telecom CEO Simon Moutter says the job losses are part of a move to a more competitive business.

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Telecom chief executive Simon Moutter said the company would cut "hundreds" of jobs over the next 10 months, but he would not talk numbers today.

Asked whether that meant jobs cuts would be limited to three figures and no more than 1000 jobs were on the line, Moutter said he was "not willing to be any more specific at this point".

More details on the long-expected cuts were likely by May.

The job cuts would result in a "material one-off charge" this financial year, he said.

Moutter said that while he was "not going to share numbers today", he was not going to try to downplay the likely scale of the cuts.

Telecom employs more than 7000 workers. The general mood among staff was "if we are going to do it, let's get on with it", Moutter said. Staff outside Telecom's Wellington building declined to comment when approached this morning.

Telecom shares were up 2.5 cents to $2.23 in early trading as investors took encouragement from the promise that Telecom would move to a lower cost base and brushed off an announced earnings downgrade that accompanied its interim result.

It reduced its full year Ebitda forecast to $1.04 billion to $1.06b, saying the broadband market had become more competitive than expected and the outlook for information technology services arm Gen-i had softened.

Telecom announced an interim net profit of $163 million on revenues of $2.14b.

On an "adjusted" basis, profits rose 57.6 per cent to $156m while revenues were down 8.5 per cent.

Earnings before interest, tax, depreciation and amortisation (Ebitda) were $516m, down from $1.6b during the same period in 2011 when Chorus was still part of the business, but Telecom said that on an adjusted basis they were up 3.7 per cent.

The company declared an 8c interim dividend, 75 per cent imputed.

Chairman Mark Verbiest said the business was "changing significantly" as fixed-line calling revenue continued to slide and mobile revenues increased.

Telecom was "fast-tracking" the changes necessary to make it a "more competitive, customer-focused company with a clear focus on the data and mobility future", he said.

Telecom had picked up 103,000 mobile customers since August when it began offering competitively priced $19 pre-pay plans, Moutter said.

It had also halted the slide in its broadband market share after "several years of decline", adding 13,000 customers since improving the value of its broadband plans in September.

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Gen-i was experiencing continued "price-based competition" and was focused on "exiting low margin business and delivering cost reduction initiatives", Moutter said, but saw opportunities in cloud computing.

Moutter said the new earnings guidance excluded "any one-off costs associated with implementing the strategy which we anticipate recognising in the second half".

That could include write-downs as well as redundancy payments.

"We have a highly complex business and our operating costs are higher than our industry peers," he said.

"We believe it is imperative that we move quickly to execute the new strategy and we must have a competitive cost base to succeed in a fast-changing marketplace."

Moutter appeared to rule out compensating customers for the recent malware attacks on its outsourced YahooXtra email service. While frustrating for customers, "it is not really a compensation issue," he said.



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