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Telstra plans to cut 12,000 jobsBy CNN's Asia Business Editor Geoff Hiscock  Solomon Trujillo took over as Telstra CEO on July 1. YOUR E-MAIL ALERTSSYDNEY, Australia (CNN) -- Australian telecommunications giant Telstra says it will slash up to 12,000 jobs over the next five years as it seeks to cut costs to battle aggressive competitors such as SingTel Optus, Vodafone and Hutchison. The company also plans to spend Aust. $10 billion ($7.5 billion) on a "next generation" high-speed broadband network within Australia, and aims to merge its Hong Kong mobile phone arm CSL with rival New World PCS. CEO Sol Trujillo, who took the reins on July 1, announced the job cuts and capital spending Tuesday as part of a four-month strategic review of Telstra, which, with the equivalent of 52,000 full-time jobs, is among Australia's biggest employers. Though Telstra has a major share of Australia's fixed-line, mobile phone and Internet markets, the company's share price has stagnated in recent years on flat demand and a series of lackluster investment moves by Trujillo's predecessor, Ziggy Switkowski. Trujillo said between 6,000 and 8,000 of the jobs would go over three years, with the remainder over a five-year period. While Telstra's media statement spoke of reducing full-time equivalent positions by 10,000 over five years, Trujillo said the figure could go to 12,000, according to comments reported by Australian Associated Press. Trujillo told analysts in Sydney he liked having the flexibility of the lowest cost structure so that if necessary, Telstra could afford a cost battle with its competitors. He said Telstra's strategy would be to cut costs by simplifying its process and systems, and reducing the complexity of its existing networks by operating under a "one factory" approach. As part of that, Telstra will replace its existing CDMA mobile network with a national third-generation GSM network, which the company claims will offer the "same or better" coverage than now available. Commentators, including former Deputy Prime Minister Tim Fischer, have already warned that closing the CDMA network runs the risk of antagonizing Telstra's rural and regional customers. Trujillo said the company would introduce a next generation IP network, with the IP core in place by the end of 2007. Spending on this network would rise by A$2-3 billion to more than A$10 billion. In August, Telstra reported a record full-year net profit of A$4.447 billion ($3.42 billion) for the year to June 2005, a result it described as "solid." Telstra, which is owned 51.8 percent by the Australian government, is being prepared for full privatization, with the final tranche of the company's shares expected to raise about A$32 billion ($25 billion). But there remains political opposition to the sale, including from within the coalition government led by John Howard. Opponents have focused on Telstra's record in providing services to Australia's rural customers. Trujillo, a former CEO of U.S. West, has already clashed with Australian politicians because of his tough views against regulation. In a statement Tuesday outling his strategy, Trujillo said regulation had huge potential impact on Telstra's business: "If excessive regulation doesn't get in the way, we can hit the plan we have laid out today. If it does get in the way, it has the potential to be harmful to our core," he said. After a global search, the Telstra board in June named Trujillo as a replacement for Switkowski, who had announced his resignation in November 2004 in response to a stagnant share price and a series of lackluster investment moves. The tenure of Switkowski, who had headed Telstra since March 1999, had been marred by declining margins and market share in the fixed-line and mobile business, and heavy losses from its expansion into Asia through joint ventures with Hong Kong-based PCCW. The shares hit a record high of A$9.20 in February 1999, just before Switkowski took over as CEO, but sank as low as A$3.92 in March 2003 as it became clear Telstra's joint ventures with PCCW were costing it heavily. Within Australia, Telstra has faced vigorous competition from No. 2 telco SingTel Optus and smaller operators Vodafone and Hutchison. Telstra is the most widely held company in Australia, with more 1.7 million shareholders. Many of them bought into the company in its initial public offer in November 1997, when it sold 33 percent at A$3.30 to retail investors. It followed that with the sale of a 16.9 percent stake in October 1999 at A$7.40 a share. After a A$750 million share buyback last year in which the government did not take part, the government's stake rose to 51.8 percent. Telstra shares, which hit a 10-week high of A$4.32 on Monday ahead of the strategic review announcement, closed almost 7 percent lower Tuesday at A$4.02. 
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