Telstra (ASX:TLS) has confirmed its decision to cut 472 jobs in an effort to automate operations and better compete with software-based communications firms. The company aims to achieve cost savings of approximately $500 million as part of its T25 strategy, which involves an overhaul of its operations and a review of its workforce.
The majority of the job cuts are expected to be in Telstra's enterprise division, which handles data, connectivity, and network services and is responsible for negotiating major contracts with corporate clients. Telstra plans to use digitisation, automation, and technology to increase efficiency and improve its competitive position.
A spokesperson for Telstra stated that the job losses would primarily affect divisions dealing with legacy products and services. The company does not intend to eliminate jobs in consumer service teams that directly interact with customers in stores or over the phone.
Negotiations with affected employees will take place over the next two weeks and may involve both forced and voluntary redundancies. Telstra has also indicated that some individuals affected by the cuts may be offered positions in other areas of the company.
Telstra has been facing declining revenues from traditional telecommunications services as it faces heightened competition from software companies like Cisco Systems and Juniper Networks, which offer software-defined wide area network (SD-WAN) services. These services enable businesses to manage their data through cloud-based networks, often at lower costs.
According to Morgan Stanley analysts, traditional telecommunications services are ill-equipped to handle the demands of remote working and mobile-based applications. While incumbent telecommunications companies have formed partnerships with SD-WAN providers, many businesses prefer to negotiate directly with them, bypassing traditional telecommunication providers.
Telstra's data and connectivity business, which generates approximately $900 million in revenues, has experienced an estimated annual decline of 10%. However, Morgan Stanley remains optimistic about the outlook for Telstra's mobile and infrastructure businesses.
Telstra CEO Vicki Brady acknowledged the challenges faced by the company's enterprise business in February, emphasising the need to address disruption. Telstra has been repricing plans and focusing on retaining customers at risk of contract non-renewal. Nonetheless, revenues in the enterprise division have continued to slide.
Telstra will report its annual results on August 17. The company plans to optimise its work processes and enhance customer experiences through the proposed changes, emphasising that the goal is not solely to reduce jobs.
