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Telecom confirms up to 1230 job cuts by mid-year; $70-$80m charge

UPDATE /  March 28: Telecom has confirmed it will cut staff numbers by up to 1230 by mid-year.

The cuts will incur a $70 million to $80 million one-off restructuring charge.

The company expects to save $90 million to $100 million a year by reducing its headcount, it said in a statement.

Telecom says it had 7530 staff as of at December 31,  2012. The number will be reduced to 6300 to 6600 by the middle of this year (the end of Telecom's 2013 financial year).

"The flow on impact of these changes onto revenues and non-labour operating costs is uncertain," Telecom's statement says.

The statement implies the cull will continue after mid-year.

"Telecom expects to incur further redundancy and other one-off costs associated with cessation of business activities as it works through the remainder of its strategic change process. Telecom will provide a second update once decisions are taken," it says.

Tech companies including Xero, Orion Health and Intergen are looking to fill hundreds of open tech positions. Some observers have expressed skepticism that Telecom middle managers will have skills transferable to high-growth software companies. ICTNZ CEO Candace Kinsor told NBR some of the jobs required skills outside of software development, such as project management and marketing, and would suit ex-Telecomers. So did Xero CEO Rod Drury and Orion Health boss Ian McCrae. However, Ms Kinser warned many positions would not be at the $100,000 level enjoyed by just under 3000 Telecom staff during its last financial year.

Telecom shares [NZX:TEL] closed up 4.32% to $2.32 yesterday.

Forsyth Barr has a holding rating on the stock, and a 12-month target of $2.33.

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Telecom on verge of cutting 1500 jobs - Curran

March 21: Telecom is on the verge of cutting up to 1500 jobs, Labour ICT spokeswoman Clare Curran claims.

In a February 22 conference call with media after Telecom's half-year result, Telecom CEO Simon Moutter said job cuts would run into the "hundreds."

On March 13, the company said it would also lay off 120 across the Tasman as it scaled back Gen-i Australia.

Telecom started the financial year with around 7600 staff (down from 8629 before the November 2011 Chorus spin-off) and laid off around 350 in the first half before Mr Moutter's announcement.

It's an open secret inside Telecom that a 5000 staff level is being targeted to make the company competitive with the merged Vodafone-TelstraClear, Ms Curran says, adding the 1500 she has been told my insiders could be conservative.

Telecom general manager for coporate relations Andrew Pirie told NBR Online, "We have nothing more substantive to say beyond what was said at our half yearly results announcement on February 22.

"At that time Simon Moutter said that job losses were likely to run “well into the hundreds” as Telecom reorganises itself to compete more effectively in today’s fast changing telecommunications marketplace.  You may also recall he wouldn’t be drawn into confirming or denying whether the total number would stretch into four figures as opposed to three. Fundamentally then, Ms Curran’s statement does not really say anything new over and above what we said on February 22."

Once Telecom crystallise the costs involved through redundancies etc, as a listed company it will be required to make an appropriate disclosure to the stock exchange, Mr Pirie says.

Call for government intervention
"The fact that Telecom was over staffed and unable to properly compete in the market was well signalled," Ms Curran says.

The Dunedin South MP says the government should have a plan to build jobs in the sector but “National is taking a hands off approach to the single biggest job loss our country has ever seen, all because Steven Joyce says it’s got nothing to do with him.”

Skilled workers will be lost to Australia, Ms Curran says.

Joyce responds
A spokesman for Economic Development Minister Steven Joyce's office said the minister was general terms of proposed significant job losses at Telecom, but had not had any update on layoff numbers since the February 22 market update.

“Our office has been in contact with Telecom to explore ways to facilitate the movement of any outgoing Telecom employees into other employment in the ICT sector.

There is massive demand in the ICT sector for skilled employees, the spokesman says.

“For example, as the Herald reported last Friday, one website last week was showing 1300 ICT vacancies in Auckland alone – with pay rates of up to $1500 a day for some roles.”

Telecom [NZX:TEL] closed down 1.31% to $2.25, near the bottom of their 52-week range ($2.14 - $2.87).

ckeall@nbr.co.nz

More by Chris Keall

Comments and questions
62

And so on it goes. These are not just "jobs". These are people. Human beings, now worried and jobless.

Moreover, the fact that totally undeserved bonuses have been provided for so long to the CEOs presiding over badly managed companies is an offence to heaven.

What ever happened to conscience, in business?

It has been suppressed through greed

What conscience in business are you referring to? There is none. Profits, greed and total disregard for shareholders reigns supreme.

Why do you think using your real name means anything to us?

Cassandra, you are right. Telecom CEO shouldn't fire people, and shouldn't get undeserved performance bonuses. In fact, he should hire all the unemployed currently on the benefit.

Shedding fat from this bloated bureaucratic monolith can only be good for the consumers that Telecom claims to serve. Since it was privatised this monopoly has done nothing by charging excessively high telephone and internet charges, pursuing a deliberate policy to confuse the public (under Gattung) and sleazy back-room lobbying to stifle competition, all the while creating multi-millionaire executives and very highly paid desk jockeys. I have no sympathy whatsoever for these guys. Remind me again how much the last CEO took out of the company while taking it from $NZ9B company to a $NZ4B in the space of 5 or 6 years. That's right. $30m.

and if every business used your short sighted and largely ignorant way of thinking no one would be able to buy anything

I worked for years at Telecom and watched senior management make blunder after blunder (Tivo, XT launch, Xtra Email and so on - the list is very long) - yet each year the execs would get fat bonuses whilst most of the staff (you know the people who actually do the work) got diddly. Same goes for pay rises.

Telecom's senior management only have themselves to blame for the predicament they are in now. They have failed to build anything compelling of unique that sets them apart from the rest of the market and now they only have discounts to play with and a bloated cost structure.

Sure Simon Mouter is a nice man but pretty unimaginative and largely numbers focused. this is best illustrated by their average at best UFB product which is at best uninspiring to the point that they still bundle copper for voice - clearly this is a product designed by committee.

How about we have a clean out at the top and introduce a culture of innovation. I am so glad I got.

Telecom people hang in there for redundancy but don't fear, the water is wonderful beyond telecom

Your right - people underemployed and delivering no value.

Cassandra - you should hire them

People who are underemployed are not valueless. But obviously some of the richly-rewarded CEOs have been pretty much so...

By the way, it's you're...not your. And why contribute to the debate if you don't have anything sensible to say...? - particularly in relation to questions of value.

So what do you suggest that Telecom should do with employee's it obviously does not require? What ever has happened in the past does not change the future.

The good people will leave/be made redundant and will be snapped up by competitors like a flash. Those that are left will be so disheartened that the business will suffer even further. I understand they are over resourced but you don't see senior management sacrificing any of their salary to save the talent.

How on earth would reducing salaries create work for those who are not required?

It wouldn't. I'm talking about the talent who leave out of frustration or because they aren't part of the old boys' network and haven't kissed butt to keep their job. Get rid of or lower the inflated salaries of those at senior management and keep the workers - those who deliver innovative products and services.

Cassandra,

You're clearly a lefty.
Go back to tree hugging where there is no P&L to worry about.

Dan

She raves on like she's some kind of wanna-be Penny Bright... or maybe she's just changed her handle to avoid all the derision that comes her way?

Hey, guys a small price to pay for NZ and Telecom having been blessed with the visitation of that global telecommunications guru, the Brogue Rogue, at a bargain $30-mil plus 'extras'.
Churlish people might point out how many of these jobs could've been saved. But, let's face it, NZ and Telecom would still be a lesser place without having experienced the genius's proven brilliance.
Who can forget how he stopped the freepost on bill payments and the magnificent insight into adding $11 for late payments? These are magnificent achievements, the like of which we are highly unlikely to see again this century.
Hell, we were blessed (no pun intended ASB, against your superstar from the 'green and pleasant land').
I rest my case.

Bugger those people, I just want more profits. I don't care about people or the environment. So long as i can have my five fancy houses and collection of cars and a nice big launch I don't really care if I have to keep 1000 people destitute and living on the poverty line...

So let's see. Do you inquire how many uneeded people on the payroll before you purchase an item? Or do you support the products that are the best buy even if that company is not overstaffed?

Err, wasn't it Labour that regulated Telecom to stop its "monopoly profits"? She should be claiming credit.

She should just shut up! It is nearly 30 years since Telecom ceased to be a government department monopoly (make work scheme), offering anything so long it was a black round dial telephone for which the grateful masses waited in line for months or years. In case Curran and some of the unthinking commentators above hadn't noticed, Telecom has been a private sector company, subject to increasing competition over the last decade, which is free to decide how many employees it needs, or doesn't need. I frankly don't care how many people Telecom lays off, just so long as they deliver some decent UFB services across the fibre running past my home!

Dan -You're quite wrong. I'm certainly not Left wing. Nor am I far Right.

You're an ACT member, are you?

There's a debate to be had here, but you're not part of it, apparently.

Attaching silly labels to people is no substitute for genuine debate.

Very common now, though, isn't it?

"Attaching silly labels to people is no substitute for genuine debate."

Such as labeling Dan "an ACT member"?

I'll happily label you a moron if you think it's a good thing for the economy if companies continue to employ people they don't need. Surely the resulting uncompetitiveness would threaten the entire Telecom workforce, not just these 1500?

Employ more people in India / Philippines for $1 NZ an hour?

Telecom is flagging it is going to desert the email [Xtra] market, after its disastrous palm off to Yahoo. And not before time.
There are many competent ISPs in NZ but Telecom as a monopoly supplier took the bottom line as a ruler instead of customer concern.

They will continue to out source job overseas as this is cheaper.What need to be made clear is that over the year many companies have been able to bring cheap workers in on works permit and pay them peanuts and there people are the one's they will keep. These workers will work for low pay just to get there PR in the country then move on to Aussie Our local kiwi workers will be the first to be shown the door or to work on reduce pay & conditions just to keep there job . Don't know what the goverment doing about there.Maybe they are hoping that other company will move to NZ because they can get cheap labour here. 60-70 % of workers working with me are foreigner. Some has got there PR while other are still waiting.Many of my old workmate are un-employed as they refuse to work for such low paid

The fact that your old workmates are:
a. Still unemployed
b. Refuse to work because they "think" they are so clever and worth more than what the market is saying, simply says that
c. They were exactly the right people to have been let go!
As a heads-up, if you share their attitude; then,
d. You might be joining them soon....

Start of the job shocks to start the house price tumbles in Auckland.

What is clear is that Telecom have to do something. They are losing customers hand over fist due to poor service and over-pricing. The need to cut costs and then cut their prices if they want to become competitive.

Nice to see that the advert at the bottom of this article is for NBR Talent The Recruitement Solution...check it out all you Telecomers reading this :-)

Oh noes, without the fat, bloated layer of overpayed middle management about to be cut (tech jobs - yeah, right), who will organise four-hour meetings for Friday afternoons? Who will organise the pre-meeting meetings so that the agenda for the meetings can be set? Who will create the pointless discussion papers without which no company can thrive? Who will make sue that everyone knows about the importance of diversity?

These people are the most important part of any company. Shame on you Telecom for cutting down on them. Shame!

Surely it's a bit rich for Labour MP Clare Curran to complain about Telecom reducing staff when it was Labour PM Helen Clark who started the attacks on the company that eventually resulting in the present share price collapse. And wasn't it Labour who set up the privatisation back in 1990 as part of their asset sales programme? Both moves were, of course, justified. Even if executives are overpayed the cost cannot come anywhere close to the savings of perhaps $100 million from downsizing by 1500 jobs.

Curran clearly doesn't understand the realities of the marketplace.

Based on your calcs, the money totally wasted on the Scottish git would have spared 450 of those jobs.
Makes you think, doesn't it?

Poor maths. $100m is annual saving, $30m was over five years. So at best it's 90 jobs - but, of course, you've got to pay someone else to do the CEO job...

It would be nice is she'd bothered to do some basic research before coming up with rubbish like this: "the single biggest job loss our country has ever seen" ... e.g., this one, from the same company!

http://www.odt.co.nz/tags/reflecting-150-years/183574/1993-telecom-plans-5200-redundancies

I must say her blatant use of this for politicking purposes makes me ill. There are people's livelihoods on the line here. I think it is very irresponsible to spread such rumours, even if the source is reputable.

Is anyone else concerned that this woman apparently has access to inside information? The cuts have been known for a while now but she seems to know more about the details than others. How can we be sure she has not attempted to profit from this information since it is commercially sensitive? Those responsible for this data breach at Telecom should be the first to go - this country is far too weak when it comes to insider trading.

I wonder if political profit could also be considered under some broad definition of insider trading?

How come she has access to inside information that even Telecom itself doesnt have?

They really need to lay off 2000-3000 people to remain competitive in the long haul and staff numbers would then be similar to Vodafone.

Bring on the job cuts. Do it quick, and do it honestly.

It'll hurt, but it'll also reset some of the "Peter Principle" salaries that are being paid to people who have completely lost touch with the actual value they deliver to the organisation.

The fact that they could have 1,500 people to many and have clearly been hanging onto them "hoping" something will change so they are "needed" actually does neither the company or those employees any favours.

Stop mucking about Moutter! With uncertainty you'll lose people you didn't intend to because they'll be the ones that have skills and confidence to jump.

He's certainly not "mucking about". It is happening rather fast.

Considering that cutting costs is all he knows how to do, it does seem to be taking a while ...

It's a move in the right direction, though 1500 is still not enough.

Telecom is bloated and needs to shed fat. Not by walking on a treadmill, but by a brisk jog around the streets which incorporates some hills.

And other innocents. Ah, the bombast. But you don't seem to have noticed that the more "unproductive" (who says so?) workers at Telecom and Vodafone laid off, the more the service to the public gets worse and worse.

Yes, let's take it that the loss of jobs for people who have mortgages and families to support doesn't matter a damn to some of you very well-heeled folk...

But claiming that the service has improved business is a nonsense. Do you ever get the chance to speak to a human being when you ring up, and to get decent, swift service as a result of this constant layoff of individuals? It took me 20 minutes to get through the other day.

Perhaps you're simply unaware of this, but your secretaries ring for you, and bear the brunt of this, I gather - as you seem to be out of touch with this reality.

All one gets now are robotic voices telling us to choose from numbers which connect to other numbers ... which we again directed to choose from ... which then direct us to *other* numbers while constantly pushing into our ears advertisements for products we're not the slightest interested in.

Finally, we are told that due to an unprecedented number of calls (just just one operator left, the rest sacked?) we have a long wait ahead of us, during which we get junk pop rubbish drilled into our years.

Wake up, Fergusson & Co. The service to the public has markedly declined in the telecommunications industry, paralleling the laying off of real people to squeeze even more profits for shareholders.

No public service ethic there... So much for the panaceas of privatisation? And for your utopia.

...it's a business! For once, and it hurts to say this, Lindsay is right!

Let's look at the wider market - the government, the regulators and other multinationals - and think before we comment, shall we? There are lots of words but little real knowldege in many of the comments.

For so long Telecom has been robbing Peter to pay Paul. Now Peter wont work and Paul needs to go so that peter can get a decent wage.

For about 5 years I've worked for Telecom. The pay is cr*p for the peters who work at the bottom (technical roles) to keep customers happy and the pay is always a premium for the pauls who run the administrative duties. These administrators are the ones who virtually are trying to control a sinking ship. It takes about 3 administrators and managers to work out a solution which is ultimately a technical problem, compared to needing only 1 savvy pleb to fix the problem which is always a technical one. now, Moutter, you need to see through the smokescreen of business administrators and cut them loose like a gangerene-infected foot because savvy plebs will not be carrying dead weight forever.

There's going to be a lot of LinkedIn updates in the next few months.

I find it strange so many people think that businesses should keep people employed that they don't need just because "these are people and have mortgages etc". Sure that's true - but you need to understand what business is...

Exactly - and if a business doesn't need people then they are not adding enough value to justify the costs of employing them. That is basic business 101. Economics 101 therefore says that these people are not productive in that business and that the best thing for them is to move on to a place where they are productive. This ensures that the economy as a whole grows and we make the most of the talents of the people as a whole.

Only 1250, what happened to the up to 1500 and then 2000 touted by the opposition? Never fear, Simon is here and his bonus is secured by saving $100 million there will be enough left for bonuses to Simon and the select few at the top.

read the article JP:

The statement implies the cull will continue after mid-year.

"Telecom expects to incur further redundancy and other one-off costs associated with cessation of business activities as it works through the remainder of its strategic change process. Telecom will provide a second update once decisions are taken," it says.

Darling, think of it as 'waves'. This will be the first of 3. Do the math.

There is a need to reduce wages at the top or at the least freeze them for a while as the company has had a record of over paying its employees.
How can a company get itself in to a situation where they have to make so many employees redundant? I would start asking question of the board as it is obvious they have not been managing the company in a professional way. Lets see some of them stand down or get voted out at the AGM.

Easy. Increased competition across all markets and customers demanding much more for much less. In the end, something has to give, In this case, it's adopting a leaner structure for personnel.

It's great so many people think laying off workers is a good thing. Depending on the situation, there are times that I have to agree. But people need to remember this when they so callously support the sacking of people - not only do those people have families and mortgages but they are also consumers. I, as a business owner, definitely prefer full employment to more unemployed because that means more people with more money to spend at my company. Look at Australia - inflated salaries by our (low) standards, sure, but that money is spent at shops and for services that support a whole heap of other downstream families. How many of you having a dig at Cassandra have actually thought about that, and determined the impact it will have on your own bottom line? You may not deal with Telecom employees directly but all businesses are hurt indirectly or otherwise when the dole queues grow. Didn't you learn anything in the last five years?

It is not for business to keep people employed even when they are not providing the business with a return on that employment (if they were then you wouldn't be thinking about making them redundant).

Yes, they are consumers. But not all of them are being forced out some (including me) have already left as we saw the writing on the wall; others have chosen to take voluntary redundancy, others to retire. Yes, some people will be forced out - but that makes the business more competitive and stronger and allows the people who have been made redundant to move into new businesses where their skills are worth more than their costs.

And full employment isn't a good thing for businesses - as full employment will drive up costs and so drive down competitiveness. In an ideal world you have a pool of unemployed that changes regularly, so some people become unemployed and others that were take up employment. This keeps costs lower, competition up and allows the economy to grow and become more productive.

Not everyone thinks as clearly as you mate. Good example was Ford back in the day paying its employees more so that they could buy Ford made cars.

I suspect those arguing its merely a 'business' and its job is to make money forget the fact that if the shoe was on the other foot they'd be crying their eyes out wondering how they would survive.

For the record, I agree telecom is a business, but its a very crap business. Laying off people isnt going to make them compeitive or attractive. Giving people what they want will - which sadly doesnt seem to drill home with them.

As an ex-Telecom "Middle Manager" who was made redundant late last year, there will be greater staff redundancies as suggested above. A figure often quoted at, and not disputed at Senior Management levels was that a target of 30% of the staff had to go to reduce costs. 1200 staff cuts appear to be the first wave this year. Desmond makes a good point above - why did the Board allow Telecom to get into this position??

Why did the board allow RIM to get to where it is ? Why did the board allow Nokia-siemens to get to where it is, Why did the Board let Nortel, Pan AM, you can name a lot of once big companies spiral down to crash n burn. but look at those that have changed and realised that the world has changed and moved on. Virgin is a great example of operating different business and moving in and out of markets. The key is having good strategic/visionary people along with a leader who the board will trust to take the company in the right direction - SJ & apple is a classic example with the music/phone business. they were a computer company not a music or communications company, they adapted....