Telstra to shed 1,400 in latest round of job cuts as competition bites

[SYDNEY] Telstra Corporation Ltd , Australia's largest telecoms company, will lay off 1,400 workers in a fresh round of job cuts, eager to rein in costs ahead of a new government-owned broadband network and as competition squeezes mobile margins.

Telstra dominates the mobile telephone and broadband industries in Australia but like for many incumbent telecom firms around the world, profits from traditional fixed-line networks have dropped while new rivals move in on mobile market share.

The latest round of cuts announced on Wednesday are equivalent to 4 per cent of its workforce and bring total headcount reduction since December 2015 to 7.4 per cent of staff.

More jobs are likely to be shed as the company attempts to transform in to a technology company, said telecommunications analyst Paul Budde, who runs his own consultancy.

"It is a clear trend that's taking place and if you compare that to the Googles and the Facebooks and the Skypes of this world, the traditional telecommunications industry is still heavily overpopulated," he said.

Telstra will lose its wholesale business when the new state -owned National Broadband Network (NBN) replaces the company's copper lines by about 2020 - a loss that will hit annual earnings by A$2 billion to A$3 billion (S$2.09 billion- S$3.13 billion).

"The market is getting more competitive, we're also seeing the acceleration of the rollout of the NBN, that's another significant contributing factor, and we're seeing Telstra, as indeed we see with all of our business customers, responding to the impacts of digital disruption," Telstra Chief Executive Andy Penn told reporters.

The cuts are nationwide, will affect most business units and will happen over the next six months, he added.

Telstra disappointed the market in February with a surprise profit drop and flagged restructuring costs between A$300 million and A$500 million for the 2017 financial year.

The latest job cuts are factored into those restructuring costs.

The stock has dropped 14.5 per cent so far this year, hurt by the weak results and a move by rival TPG Telecom to enter the mobile market.

Telstra is seeking growth away from traditional streams by investing in new businesses such as mining, healthcare and cloud computing, but none of these are yet picking up the slack created by traditional revenue declines.

Shares in Telstra fell 0.5 per cent on Wednesday as the broader S&P/ASX 200 index climbed 1 per cent.

REUTERS