Telecom to lay off 120 staff from Gen-i Australia as overhaul begins

Wednesday 13th March 2013

Telecom Corp, the country's biggest phone company, has kicked off its structural overhaul by whittling down the services offered at its Gen-i Australia unit in a move that will see 120 jobs go.

The unit will focus on supporting large corporate customers with specific trans-Tasman IT requirements and exit other activities, Telecom said in a statement. That will see headcount fall to about 60 employees from the existing 180.

"Gen-i Australia was originally set up about 13 years ago to serve the trans-Tasman needs of existing corporate customers," Gen-i chief executive Tim Miles said. "Over the years, it has broadened its activities within the Australian ICT services market - but we have never had the scale to compete effectively in these other market segments."

Telecom is shifting its focus to providing services and away from building things to become a data-driven and mobile-focused telecommunications operator, and plans to shed hundreds of jobs and quit unprofitable businesses. More detail is set to be unveiled at the investor day in May.

The shares sank 5.7 percent to $2.305, having gone ex-dividend today.

No cost was put restructure, which will include a redundancy bill, though Telecom has indicated it expects to wear a material one-off cost in the second half of the financial year. That charge has been excluded from Telecom's annual guidance for adjusted earnings before interest, tax, depreciation and amortisation of between $1.04 billion and $1.06 billion this year.

The company's Australian AAPT unit will pick up work that Gen-i Australia exits, Telecom said.

Miles said the trans-Tasman market has "good growth potential" and accounts for about 40 percent of New Zealand's international internet traffic, compared to 10 percent at the turn of the millennium.

Telecom has joined with rivals Vodafone New Zealand and Telstra to build a new trans-Tasman cable at a cost of at least US$60 million, with a completion date flagged for mid to late 2014.

Gen-i's first-half earnings fell 1.6 percent to $186 million on a 4.9 percent decline in sales to $639 million as it faced increasing price competition and had fewer customers on the legacy copper-line services it delivers.

BusinessDesk.co.nz

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