Telkom has caused a stir among its management staff by issuing a letter to 2 635 employees informing them that they may be affected by a potential retrenchment process. This has apparently been initiated by an ‘unsound financial situation’ in which Telkom has found itself, caused by increasing costs and dwindling revenue. This is despite Telkom’s previous attempts to cut costs which included a voluntary retrenchment and early retirement process. The letter went on to say that Telkom wants to implement a flatter management structure which will necessitate the cuts.
Of Telkom’s 19 215 staff, 2 635 are categorised as management, a number which Telkom plans to reduce by about 25% or approximately 650 people.
The operator will consult with affected staff members and decide which positions can be merged and which new positions need to be created. A new organisational structure will then be introduced at management level with fewer available positions. Management employees can then apply for the new positions and any affected employees who have not been placed will face possible retrenchment.
In an effort to calm fears, CEO Sipho Maseko sent out an internal email explaining that the company needs to do more to improve its financial position and it needs to do it quickly. He says that Telkom has developed a turnaround strategy to stabilise the situation and improve performance with several initiatives to cut costs, but they alone will not go far enough.
“Regrettably, one of the areas that we need to constantly look to challenge and improve, as part of managing our turnaround, is our employee costs. We have to manage our employee costs down so that we can be competitive in different areas of our business,” said Maseko.
Staff cuts, will however only be implemented as a last resort and Telkom will continue to look at other ways of trimming expenses.
According to Maseko the potential cuts are part of a broader strategy to turn the company around and re-optimise shareholder value. “We want to be able to stabilise revenue growth, improve and grow EBIDTA margin by 1% to 2% over the next three years, strengthen free cash flow, and normalise CAPEX to revenue in line with benchmarks,” said Maseko.