Moutter's blunt message to Telecom staff

Telecom staff face a pay freeze and smaller bonuses; telco about to split into two parts

Telecom staff face a pay freeze, smaller bonuses, benefit changes and further restructuring according to leaked memos obtained by Labour ICT spokeswoman Clare Curran.

In a blunt message to staff, Telecom chief executive Simon Moutter says the changes will bring a "leaner, more competitive Telecom" that wouldn't be the right fit for everyone.

"So if you don't think this is the place for you anymore, then you should feel free to talk to the human resources team about your options," he writes.

Memos sent to staff by chief technology officer David Havercroft said Telecom was proposing to split into "two distinct parts" currently dubbed "Servco" and "Netco".

Netco would have responsibility for network, technology and operations.

Customer-facing Servco would combine Gen-i and Telecom's retail business, though "the detail is still a bit of a work in progress", he says.

"It is not an uncommon operating model for telecommunications companies. But we will have to work hard together to get it right."

Havercroft says Telecom's technology and shared services (T&SS) business unit, which employed 1733 permanent staff in December, was in the midst of a 20 to 30 per cent cull. But the decision to split Telecom into two parts meant "bottom line, there will be more change needed". Staff in some teams will be offered voluntary redundancy, he says.

Moutter's memo says he did not believe it was appropriate or right to be giving pay rises this July.

"It simply doesn't pass the red face test for me so there'll be no funding budgeted for salary increases, myself and the leadership team included."

Short-term incentives - or bonuses - were likely to be "significantly lower than you have seen in recent years" and based on the company's overall performance, rather than those of individual business units.

"I can't be exact as we haven't finished the year yet, but on current performance the payout is likely to be low."

Moutter points out the company has already downgraded its profit forecast in February and told staff "the reality is this year isn't going to be a high-performing year for us".

Moutter is on an annual package of up to $4.7 million, comprising a $1.35 million salary and maximum $3.35 million in incentive payments.

Telecom will stop using online forms to appraise staff performance, reverting to a "far lighter" system of one-on-ones and "adult-to-adult conversations" on regular four-to-eight week cycles, he says.

The "forms and processes" associated with performance appraisal have impeded Telecom, he says.

"When we hit 'appraisal season', the company nearly grinds to a halt with the bureaucracy."

An arrangement under which staff get discounted Telecom services supported by a dedicated helpdesk will be scrapped and replaced with a "straightforward monthly credit" of $150 against their monthly bill.

An employee share scheme, in which 300 staff are enrolled, will also be axed.

Moutter announced last month that the company will shed between 930 and 1230 staff during the first six months of this year.

Forsyth Barr analyst Blair Galpin has forecast job losses would climb to about 1750 following a second round of cuts in about a year. But Curran says her information is that additional cuts to more senior staff ranked at "tier four" and above were planned for September.

"I am not saying there shouldn't be a restructuring in Telecom," she says.

"Clearly there is a lot of unnecessary expenditure, but what is going to happen to all these people?"

Telecom spokesman Andrew Pirie said on Thursday that the company had no job cuts currently planned beyond those that had already been announced.

The initial team-by-team restructuring of the T&SS unit began on March 1 and should be complete by May 8, Havercroft says.

Comments

Anonymous

1

Leaked memos? This stuff has been in the rumor mill for a couple of weeks. Word is the unofficial number of Gen-I staff that need to go is around 800 and that certain business arms have protected themselves already.

If I were a Gen-I outsource customer I think I'd be looking at other options with this strange kind of proposal. Given "the detail is a still a bit of work in progress" reportedly, it looks like they've gone off half cocked.

These animals earning plus a million a year and well in truly in an epic burn of the company and you have to wonder what will be left.

The market is already flooding with Gen-I staff and the good ones are being snapped up straight away. Sadly, with the whole reputation of both Telecom and Gen-I a lot of leavers are being over looked.

There is no doubt the company needs to cut costs. But there is always that danger of hitting an artery when it comes to self-surgery.

Anonymous

2

Telecoms's core revenue has been declining by $100m a year for the last 5 years or so. Taking $90M of costs out with this round of restructuring is an essential first step . But it's not an end game.

The big question is still what can telecom do to turn that revenue decline around? Winning back the government business would be a good start Rivera and a few key appointments will certainly help that strategy. But they need a lot more.

Go Simon.

Anonymous

3

The general consensus with the comments on here seems to be that Gen-I is buying Revera to get access to the DIA IaaS.

You'd certainly hope not for their sake. Gen-I and Revera don't have overlapping capabilities and skill-sets, or products.

ReadyCloud is not true IaaS just like DIA IaaS is not true IaaS. The closest thing to IaaS and PaaS in New Zealand is Revera. They have the most mature model and service offering. They also have the lowest number of government agencies while Datacom has the most and IBM has one.

So Gen-I buys a nice onshore cloud capability if the rumours are true. Hopefully that's the motivation. They can dump ReadyCloud and focus on maturing the Revera product set, hopefully keeping the Revera guys who built it.

It's still not a great proposition, with Amazon landing in Sydney, along with Rackspace and a few others, offshore cloud never looked so good. And with a 500% - 1000% pricing difference between New Zealand IaaS and the rest of the world# Well, it doesn't take a rocket scientist to figure out that within a couple of years the local cloud providers will be gone.

Unless of course, government mandates to keep all data on shore. Which they haven't and never will. The horse has bolted anyway, the majority of government agencies are already using offshore services.

DIA IaaS is a contract. Nothing more. Nothing less. Why they need all the staff they have to manage it is astounding really. It's simple. An agency signs a contract with DIA that allows them to look at the price book from one of the three and then they don't have to go to market. The whole shooting box is based on a ten year business case that requires over 70 agencies to join by the end. Hell, we'll be onto cloud version 5.0 by then.

The DIA IaaS offerings are already more expensive than other similar local product. It doesn't help that they clip the ticket on the way through. Their contract will go the same way as One.Govt.

So I'd suggest that Gen-I stands to gain nothing by "buying into" government IaaS. What they do gain is a solid, mature, granted expensive because it is New Zealand, entry level cloud IaaS and PaaS offering. If it was me, I'd buy it, cancel the contract with DIA, drop my pants on price, and blow the DIA IaaS out of the water while picking up every commercial client they already have a customer.

They don't have long though# Couple of years max. In the end Telecom / Gen-I will have to fall back on their core product. Telecommunications. If they focus there it should be fine. After all, you can't get to cloud without a network.

Caveats: I don't work for any of them, and never have.

Anonymous

4

So Telecom (and in this particular instance T&SS and Gen-i) who have largely overlapping capabilities and skill-sets focussed in different directions (inward and outward), are facing a 30% cull or higher...

So buying Revera (which has a 100% overlap with Gen-i) is only going to result in a very high cull ratio on Revera when they get a shiny blue Gen-i badge and a huge white Telecom bird-dropping on the side of their building.

All Telecom want Revera for is access to the Government IaaS panel.

If I was a Revera employee (or a below-par Gen-i employee that has managed to survive through the restructures... and there are a few of those...) I'd be afraid..very afraid.

The flip-side for all the competitors of course, is that there is likely to be some good capability out looking for jobs in the near future, as Gen-i is renowned for shedding the quality and keeping the dross.

Anonymous

5

Earn your millions and when the going gets tough, crap on everyone else.

Anonymous

6

Might be worth a look if they get their overheads down.

Anonymous

7

This is all really simple stuff that should have been done in Telecom years ago. If i was a shareholder i would be very impressed with their new CEO. Now they might actually have a chance at surviving in the new competitive environment. I just hope that the Level 2&3 people at telecom don't have their heads stuck in the past and by-in to the new plan and don't just try and save their empires rather than create actual meaningful change.

Anonymous

8

Cutting costs won't save Telecom in the long run - only producing decent products and services will do that. No evidence, so far, that Moutter the Booter is the person to lead Telecom into the post-PSTN era. Contuing the Xtra-Yahoo partnership was not a good start.

Anonymous

9

Sucks to be the Simon, forgoing that 3% cost of living payrise/adjustment. Guess he will have to suffer along on around 18k a day which is pretty tough - said no one ever.

Anonymous

10

See this morning's decision on redundancy. CEO comments also sound like constructive dismissal - you can't tell employees to get a new job...

Anonymous

11

If I were a shareholder - Simon is taking all the right steps towards the right direction. But as a normal consumer... I moved my Telecom land line to Vodafone, basically better deals. I moved my Broadband from Telecom to Vodafone yet again better deals and get more for my money. Now finally I am moving my mobile plan from Telecom to Vodafone, there is a catch, Telecom deal is better for me than Vodafone but the Telecom interface for mobile is beyond crap. Even thought I don't get as good value with Vodafone, I am moving over because of better service. If I were Simon, I will look at improving service and adding value to their services to capitalize on the market and retain existing and attract new customers.

Anonymous

12

regardless of the direction of Telecom and the internal decisions being made - what right has Clare Curran in releasing the leaked internal goings on of a corporate orgainsation? I recall the outrage when Cunnliffe and Clark were talking of changes to Telecom's structure and the share price tanked as a reuslt, lucky not to be done with insider trading. Any difference here with Clare in manipulating the share price?

AK Purple

13

Maybe Simon could start by fixed the rort that is gen-i flexi-working. Start by reviewing the blogs gen-i doesn't want you to see. http://archive.is/NiZ3a

Anonymous

14

I suppose Simon and his executive team are going to set the example by cutting their salaries by 50%?

Anonymous

15

In the 20+ years I have been in IT, I have lost count of the number of times that telecom have hired and fired thousands.

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