CEO explains why his Australian company just announced 8,000 job cuts

June 20, 2018
  • Telstra CEO Andrew Penn reflected on his company’s Wednesday announcement that it planned to cut 8,000 jobs in an interview with CNBC.
  • The CEO highlighted the difficulties currently faced by the telecommunications industry and acknowledged the need for the company to change the “nature” of its products and services.

Following the Wednesday announcement of sweeping corporate changes that are set to go into effect over the next few years, Australian telecommunications company Telstra’s stock fell to 7-year lows.

Speaking with CNBC’s “Capital Connection,” the company’s CEO, Andrew Penn, said the changes — which will include 8,000 job cuts — were needed because the company is “at a tipping point.”

“The telco industry is going through a very challenging and dynamic period right now, but at the same time, demand for telecommunication products and services has never been greater,” Penn said.

While that is a global phenomenon, Penn said the issue was particularly acute in Australia due to the roll out of the country’s government-owned monopoly broadband network.

As part of its large-scale changes, the company plans to create a standalone business unit, called Telstra InfraCo, that will include Telstra’s fixed network infrastructure.

With consumers today frustrated with the complexity of products and services offered by telecommunications firms, Telstra needs to make short-term “tough economic decisions” in order to secure its future, he added.

“We have to leave behind about 500 million (Australian dollars) worth of changes that we’ve previously received,” Penn said, “but we believe that’s the right decision and we’re also going to radically simplify our products and services.”

Speaking about the growth prospects of the company, Penn said “the reality” is that Telstra has continued growing its customer base, but reiterated the importance for the company to change the “nature” of its products and services while investing in future technologies such as 5G.

“Over the long term, the best way to support dividends for shareholders is by having the right strategy and achieving success in growth,” he said.

On the planned job cuts

Asked about Telstra’s plan to cut 8,000 jobs over the next three years and how it could impact the company politically, Penn said it was necessary, but acknowledged it was “the most difficult part of today’s announcement.”

“The impact on our people, the impact on jobs is something that’s obviously very challenging and we take very seriously,” he said.

Still, he said: “If Telstra’s going to be successful in the future, if we’re going to grow, if we’re going to deliver the sort of customer experience we need to, we do need to make these changes.”

To support those affected by the changes, he said, the company has put in place a 50 million Australian dollar transition fund.

On the political end, Penn said: “I have made sure that we have kept both sides of politics fully-informed of our decision so that they understand the rationale and the reasons behind them.”

—Reuters contributed to this report.

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