Telstra to Cut 3% of Workforce Amid Australia’s Jobs Drop

Telstra Corp., Australia’s biggest phone company, said it would cut about 1,100 jobs within the next nine months to boost productivity, as a waning mining boom pushed unemployment to a four-year high.

The cuts to Telstra’s operations unit, representing about 3 percent of its total 37,721 workforce at the end of June, would stop duplication of work and help the division focus on growth, Brendon Riley, Telstra’s chief operations officer, said in an e-mailed statement yesterday. It’s about 6 percent of jobs in the operations business, Riley said.

Australian companies have been shedding jobs amid a weakening economy which has forced the Reserve Bank of Australia to cut interest rates to a record low and contributed to former prime minister Kevin Rudd’s Sept. 7 election defeat. Ford Motor Co. announced in May it would end production in the country after nine decades, with the loss of 1,200 jobs, and General Motors Co.’s Holden division has said it was waiting on the result of the poll before deciding on further investment.

“Sluggish output growth, rising unemployment, low and fragile confidence, and benign inflation” were making it more likely the central bank would have to cut rates by 25 basis points to 2.25 percent in November, Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney, wrote in Sept. 23 note. “The peak in mining investment, which has been the dominant force driving growth in the economy, is very near.”

Unemployment Climbs

Australia’s unemployment hit a four-year high of 5.8 percent in August, according to government data released Sept. 12. Overall employment fell 10,800 from a month earlier.

Telstra had previously announced a combined 1,080 job cuts at its directories unit and call centers. The carrier’s net income per employee, of $103,830, is the seventh-highest globally among phone companies with more than $10 billion in annual sales, according to data compiled by Bloomberg.

The operations unit where the latest cuts are being made is responsible for Telstra’s networks, including building and running cloud computing, data hosting, and Internet-based products, according to the company’s website.

“We are finding many examples where we could work better together in a more streamlined and productive way,” Telstra’s Riley said in the statement. “We are seeing reductions of roles in declining businesses, due to evolving technologies and the restructuring of our industry, and growth in other areas.”

Employees were told about the cuts yesterday, Riley said, with almost half of the planned reductions already explained to workers. Jobs to be eliminated include fixed network technicians, customer service workers, and employees at the business’s media operations team, according to the statement.

Telstra spent A$1.3 billion ($1.2 billion) upgrading its network and bought A$1.2 billion of new spectrum last year to tap surging demand for wireless services as it prepares to hand over its higher-margin fixed-line business to NBN Co., a government company building a national broadband network.

The rollout of NBN’s fiber network is falling about 50 percent behind targets and the program will be reviewed, Communications Minister Malcolm Turnbull told reporters in Sydney Sept. 24.

Before it's here, it's on the Bloomberg Terminal.