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Telstra says to expect more job cuts

Despite being probed by retail shareholders at meetings earlier this week, Telstra’s (ASX: TLS) senior management has said that its workforce will get smaller every year.

Yesterday morning chief operations officer Brendon Riley said, “overall, probably every year we will get a bit smaller … I don’t know about indefinitely, but certainly for the next few years that will be the case.”

When unions asked where the 1100 job cuts announced by the company earlier this week would come from, only 360 were accounted for. “We found out about 360 of the jobs,” Community and Public Sector Union organiser Teresa Davison was quoted as saying in The Sydney Morning Herald. “But they couldn’t give us any information on the 740.”

Telstra boss David Thodey defended the company and said the cuts were part of a “business rebalancing” and that more jobs have been created than axed. It is expected that reduced spending will come from older, legacy business divisions such as landlines and ‘transitioned’ into the booming businesses like the NBN, defence contracts, international expansion and National Application Services.

Employees prepared for change

Over the past decade the total number of Australian-based employees has fallen dramatically, from 48,317 in 2001 to 38,663 at the start of 2013.

Australia’s telecommunications market, including mobile and internet, has reached a ‘saturation’ point and the company is now shifting its focus to what opportunities it has left. The National Application Services and International divisions are the company’s most rapidly growing, increasing revenue by 17.7% and 16.2%, respectively in the last year.

Foolish takeaway

Telstra has a market capitalisation of over $60 billion and is one of the biggest private employers in Australia. In order to increase shareholder value, management have one of two options: grow revenues or cost cut. Although the company has booming divisions, they are still small when compared to other parts of the company like mobiles, so the ‘restructure’ will be a driving factor in reducing costs and improving returns to shareholders in the next 12 months.

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Motley Fool contributor Owen Raskiewicz does not have a financial interest in any of the mentioned companies.

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