Staff and reporters alike gasped when Telstra chief executive Sol Trujillo announced that he was getting rid of between 6 to 8,000 full-time positions over the next three years, and up to 12,000 over five years, as part of his turn-around effort for the Aussie telco.
Newly appointed CEO Trujillo today announced the results of his four-month long review of Telstra's operations and wholesale reform is the name of the game.
Whether or not the Australian government, which still holds a 51.8% stake in Telstra, will go along with Trujillo's massive staff reductions remains to be seen however.
Trujillo says Telstra has too much of everything, in a reference to the complexity of the organisation. He says Telstra will rationalise away two-thirds of its 330 network platforms, and three quarters of its 1,200 business and operational systems within three years.
Telstra's mobile phone CDMA network, which is used to deliver voice calls and broadband via an EV-DO overlay to rural and remote areas in Australia, will also go. Instead, Telstra will roll out a GSM/UMTS 3G network, which according to COO Greg Winn has only a quarter of the capital expenditure per customer compared to CDMA.
However, it's not all cost and staff cutting at Telstra: a next generation IP network was announced as well. The cost of the NGN is over A$10 billion according to Trujillo and the core of it will be in place by 2007.
Other announcements included a deal with Sony Pictures for the Telstra Bigpond ISP which will bring movie downloads "to PCs" from March next year, and a commitment that 80% of customers will have broadband in three years, up from 50% today.
Telstra is projecting top line growth between 2 and 2.5% CAGR between now and 2010, but next year will see a decline in pre-tax earnings between 19 to 24% thanks to accelerating depreciation of decommissioned assets as part of Trujillo's restructuring. This figure could be up to 30% if Telstra adds provisions for staff redundancies.
How the bloodletting at Telstra will affect its New Zealand subsidiary isn't yet clear; Computerworldunderstands that TelstraClear has been told it cannot build the long-awaited third mobile phone network in the country as a result of Trujillo's cost-cutting.