Leaked Telecom memo: confirming layoff rumours? What you think?

Forums › Spark New Zealand (including Skinny and BigPipe) › Leaked Telecom memo: confirming layoff rumours? What you think?

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#767981 22-Feb-2013 23:38

mattwnz: It was on the news, so I presume factural. But the problem is that the staffing has likely remained the same prior to the demerging, hence they are just adjusting the staff to the new businesses size. But they have over 2500 earning over 100k, and 10 people earning over 1 million, so they pay out quite a lot in wages.

I don't follow.

They had 100 staff, they cut the company in half, 50 go with each company, but now they have to many people in one half?

Even if we assume that 10 went with one half and 90 stayed with the other, wouldn't that then mean that the half with 10 staff will be needing to pick up some staff anyway?

Seems like this 'demerging' thing is just bunk.... or did they make two companies.... but with Chorus they only moved over the staff it actually needed, leaving Telecom to sink?

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turnin

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#767984 22-Feb-2013 23:45

At what point is it better to have a company that makes money more " efficiently" at the cost of more unemployed.
This is one of the issues I have with the sale of state owned assets.
It seems like the more " efficient" a company is more and more jobs go, customer service goes down hill and more money ends up destined offshore.
The purpose of a company is to increase shareholder wealth, it's not about keeping people in jobs or ensuring social amenity.
If you go back to the days of the post office run telecom it may have been criticised for its inefficiency but I'm sure a higher percentage of its profits stayed in NZ and it stayed here for longer. With higher rates of foreign ownership and foreign investment we have higher rates of unemployed, social tension and a myriad of other negative factors. yet we're about to sell even more assets. where is the renowed kiwi innovation in that scenario ?

oxnsox

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#768037 23-Feb-2013 09:11

There are weird accounting ways to increase wealth.
As an example: Chorus use contractors(Downer, Transfield, etc else), yet as a standalone business Chorus must be profitable...so it adds a small but fair margin to these contract costs (say 12%). Chorus then have fair and transparent costs to it's customers whilst maintaining manageable overheads. And the Downers and Transfeilds retain profitability too.

Current business practice is often about management of cost thru such vehicles rather than taking on the liability of providing the full service in house. And it's usually a more profitable solution.

DonGould

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#768114 23-Feb-2013 11:51

oxnsox: There are weird accounting ways to increase wealth.
As an example: Chorus use contractors(Downer, Transfield, etc else), yet as a standalone business Chorus must be profitable...so it adds a small but fair margin to these contract costs (say 12%). Chorus then have fair and transparent costs to it's customers whilst maintaining manageable overheads. And the Downers and Transfeilds retain profitability too.

Current business practice is often about management of cost thru such vehicles rather than taking on the liability of providing the full service in house. And it's usually a more profitable solution.

I don't understand.

Are you suggesting that legal and hr services simply need to be outsourced because they've become to expensive to run in house?

Are you suggesting that Telecom needs to be further broken into more bits and sold off so that the bits can run as more efficient components?

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JamesL

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#768146 23-Feb-2013 12:33

Shedding Gen-i would be a good start..

gzt

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#768151 23-Feb-2013 12:51

It is an accounting practice used to reduce liabilities and reduce the need for capital and improve ratios thus making yourself more attractive to the investment market. Instead of having future liabilities like holiday pay etc on the books you pay out to a contract service $X per connection, $X per service etc and have no future liabilities for employees, reduced HR related costs, fewer maintenance and replacement requirements to give a few examples.

As for selling off Gen-i, that would be a huge strategic blunder. I cannot see any reason why they would even consider it. What would be the advantage or gain?

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old3eyes

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#768156 23-Feb-2013 13:19

JamesL: Shedding Gen-i would be a good start..

How do you work that out??

Regards,

Old3eyes

DonGould

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#768166 23-Feb-2013 14:03

old3eyes:
JamesL: Shedding Gen-i would be a good start..

How do you work that out??

Yip, I'm keen to hear this one explained as well.

I'd have thought the it would be a crown not a thorn or is it just performing that poorly?

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mattwnz

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#768217 23-Feb-2013 17:06

The media seems to be giving them a bit of a bashing about laying off staff, but they are one of many companies now laying off staff around the country, and those other companies aren't being publicized as much. The other thing is that the turnover appears to have shrunk a lot, I remember when they were turniing over 1 billion dollars a year and were the largest company on the sharemarket. The current staffing structure and levels is perhaps a legacy to when the company was far larger, and hadn't sold off different divisions. Other ISPs don't seem to employ anywhere near as many staff. 7000 staff sounds like a lot for just an ISP/phone company.
Also I though Gen-i was doing really well.

gzt

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#768241 23-Feb-2013 18:20

Much higher than that now. From 2012 report:

mattwnz

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#768276 23-Feb-2013 19:40

gzt: Much higher than that now. From 2012 report:

Maybe it was a billion profit, rather than turnover. But if it is earning so much more now than it was prior to 2007-8, you have to wonder why it's share price is less than half of what it was back in 2007-8. I recall it was up to about $6 per share in about 06-08 prior to regulation, now it is down to about $2.50 per share.

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DonGould

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#768277 23-Feb-2013 19:45

mattwnz:
gzt: Much higher than that now. From 2012 report:

Maybe it was a billion profit, rather than turnover. But if it is earning so much more now than it was prior to 2007-8, you have to wonder why it's share price is less than half of what it was back in 2007-8. I recall it was up to about $6 per share in about 06-08 prior to regulation, now it is down to about $2.50 per share.

The company got well over valued and it's just taken some time to trade down.

The market is also getting much smarter about telcos.

I suspect that investors are looking at telecom and not seeing what needs to be seen.

Telecom could be doing a bunch of things to improve BB earnings but they're not.

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gzt

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#768278 23-Feb-2013 19:51

Um.. because of the stock split in 2011?

No offence, but I really wish you would do a minimum of research before posting matt.

mattwnz

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#768344 23-Feb-2013 22:50

gzt: Um.. because of the stock split in 2011?

No offence, but I really wish you would do a minimum of research before posting matt.

Do you mean the chorus split, or their was a share split? I don't recall there being any share split in 2011.Chorus was only worth about 1/4 of what telecom is worth, so it was about a 1/5 split anyway. Telecoms market cap is 4 times that of chorus, so it didn't cause a big drop in the share value, when it was split off, and the shareprice has recovered since. I have been following telecoms share price quite a bit since regulation was announced. There have been 2 main noticeable things that have caused the value to change since regulation, the other was the yellow pages sale where there was a share buyback to distribute the profits to the shareholder. I recall that that increased the share price as the shares were purchased back off investors so there were less total shares out there.
So now shareholders also have chorus shares, so the combined value of telecom + chorus shares is quite a bit more than it was when they just owned telecom shares prior to the split. Although those chorus shares are very volatile, as they jump up and down in value, and think they are about the same value now as they were when they were first issued. Investors though have had dividends, and dividends are probably the main reason why people have telecom shares, as it has quite good returns relative to the share price.

jamesrobert

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#768397 24-Feb-2013 08:53

12 months ago my family had 3 Telecom accounts - internet and phone.
We now have none - 2 with NOW, 1 with Vodafone.
I take some of the blame.....

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