Telkom to retrench 15% of its staff

Mobile network operator Telkom has said it will begin a formal retrenchment process that will see it layoff as much as 15% of its workforce as it casts a sharp focus on cost savings initiatives.

On Tuesday, following its trading statement for the quarter to the end of December, Telkom said it will enter a formal Section 189 consultation process, as it looks to restructure some of its operations.

It added that all business units and subsidiaries will be affected.

“As the group manages the delicate migration of revenue between old to new technologies, it is challenged with managing the costs associated with the different technologies, the competitiveness and sustainability of the group,” Telkom said in a note to shareholders.

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The big six network operator previously said changes between its mobile post-paid and prepaid mix and an increasing cost base had hurt its earnings.

In the trading update Telkom said that investments made in its post-paid business to drive higher annuity revenue and the impact of increased power cuts put pressure on costs.

Having navigated a challenging trading environment during the quarter, it reported muted group revenue growth of 2.3% to R11 billion, while mobile revenue grew 7% to R5.7 billion.

Cost-saving initiatives

The group said it has begun a number of cost-saving initiatives to address its cost base, adding that the benefits will start filtering through in its 2024 financial year.

The group plans to raise R1 billion by the end of its 2023 financial year through the sale of qualifying devices, which it will sell to external financial institutions, to mitigate the impact of pressure on free cash flow.

“Management has therefore embarked on a restructuring programme, which includes the S189A process, to optimise group costs in line with evolving technology capabilities and demands,” it said of its employee cutback plans.

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It said the Telkom board supported the consultative process, in order for the company to navigate its migration to new technologies as well as current economic headwinds effectively.

The mobile network company said it remains committed to minimising the impact of the restructuring and will engage with all its relevant stakeholders and employees.

*Written by Ntando Thukwana

This article originally appeared on Moneyweb and was republished with permission.
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