Optus to slash 450 jobs

About 450 positions across Optus will disappear next week as the telco strives to lift its competitiveness in a "changing" telecommunications industry, an e-mail from chief executive Paul O'Sullivan informed staff today.

In an e-mail titled "Staying competitive", a copy of which was obtained by Computerworld, O'Sullivan said a "combination of permanent and contract positions as well as vacancies that won't be replaced" will be cropped across the entire business.

"We are finalizing the actual number of jobs that are likely to be directly impacted and expect this to be around 200," O'Sullivan wrote. "We will be striving to keep this number to the absolute minimum."

Optus' total headcount is about 10,000 and the company will speak with each of the individuals affected to discuss their situations and any alternative employment opportunities, according to O'Sullivan; however redundancies "will not be voluntary".

"They will result from areas where we have decided to streamline management or alter our operational costs," he wrote. "We will engage an external provider for counselling and career services to support the best personal outcome for those people impacted."

While "the size of these changes can't be summed up in one e-mail" O'Sullivan will explain over the next three months how management plans to restructure the business.

O'Sullivan cited mobile caps, corporate price erosion, and the reduction in mobile termination rates (VoIP) as all "removing value from the telco market at a rate of several hundred million dollars per year".

At the same time, O'Sullivan believes new growth products like broadband, 3G and IP services will take "some years to offset this decline".

"So we have a challenge and an opportunity," he wrote. "On the one hand we are experiencing a decline in both revenues and growth across many major sales areas. On the other hand we have growth areas for the future which are backed by sizeable ongoing investment - we are investing almost a billion dollars this year alone!"

O'Sullivan also took the opportunity to remind his staff that all communications companies in Australia "reflect these challenging times" with AAPT for sale and Telstra's share price falling from more than $5 to $3.80 in "just nine months", and "almost all players are reporting profit falls".

Optus has been working on a "turnaround" plan, which O'Sullivan anticipates will return the company to growth over the next few years.

The four-fold turnaround plan aims to reduce management layers, refocus on being the "leading challenger" to maximize market share, cost reduction through investment in automation via the Web or through speech technology, and slashing red tape by "reducing meetings; eradicating unnecessary forms and approvals; and re-empowering managers to operate within their quarterly budgets for [operating expenditure] and headcount".

O'Sullivan also signalled more outsourcing in a "few areas where Optus adds little differentiation and we can save considerable cost".

"We have existing customer service functions in India, which are working well and we plan to increase these," he wrote.

To minimize the number of redundancies, Optus has also reviewed its procurement strategy and areas of "discretionary expenditure", like travel and entertainment, to limit costs.

A briefing on the turnaround plan will be given to the senior management group on Friday March 24.

An Optus spokesperson has confirmed with Computerworld that the e-mail was sent.

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