Telkom, the mobile network operator, has announced that it will begin a formal retrenchment process that will result in the layoff of up to 15% of its workforce as it focuses on cost-cutting initiatives.
Following its trading statement for the quarter ended December 31, Telkom announced on Tuesday that it will initiate a formal Section 189 consultation process in order to restructure some of its operations.
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It went on to say that all business units and subsidiaries would 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.
Previously, the big six network operator stated that changes in its mobile post-paid and prepaid mix, as well as an increasing cost base, had harmed its earnings.
Telkom stated in its trading update that investments in its post-paid business to drive higher annuity revenue, as well as the impact of increased power outages, put pressure on costs.
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After navigating a difficult trading environment during the quarter, it reported 2.3% group revenue growth to R11 billion, while mobile revenue increased 7% to R5.7 billion.
The organisation stated that it has begun a number of cost-cutting initiatives to address its cost base, and that the benefits will begin to be felt in its fiscal year 2024.
To mitigate the impact of pressure on free cash flow, the group intends to raise R1 billion by the end of its 2023 fiscal year through the sale of qualifying devices to external financial institutions.
“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.
It stated that the Telkom board of directors supported the consultative process in order for the company to effectively navigate its migration to new technologies as well as current economic headwinds.
The mobile network company stated that it is still committed to minimising the impact of the restructuring and will consult with all relevant stakeholders and employees.
