Debt-troubled Reach To Sack 250 Staff
Sydney Morning Herald
Friday May 23, 2003
Reach, the troubled Asian venture of Telstra and Pacific Century CyberWorks (PCCW), will cut 250 staff in its cost-cutting program.
The redundancies represent more than a quarter of the undersea cable venture's 960 staff worldwide, but is half the number of redundancies anticipated by a Hong Kong newspaper last month.
The cost-cutting follows long and painful debt negotiations between Reach's parent companies and the banking syndicate responsible for $US1.5 billion ($2.3 billion) in loans to Reach. The banks lifted debt covenants and extended the loan in return for $US300 million in capacity pre-payments from Telstra and PCCW.
But further cost cutting was needed to help the company against US-based competitors in the region which have emerged from Chapter 11 bankruptcy protection with a vastly lower cost base.
``The global telecommunications sector needs reshaping. This is expected to continue for some time, so we have taken the necessary steps to face this changed market reality now," Reach chief executive Dick Simpson said.
Reach said it had completed the voluntary redundancy phase of its cost-reduction program, and over the next few weeks would institute an ``involuntary program" of redundancies.
The company said it did not know how many staff would walk rather than be pushed out the door, or which areas would be affected most, but the job cuts would be completed this year.
Reach spokesman Martin Ratiah said the company was still working through the program and the exact make-up of the redundancies was ``up in the air at the moment".
Reach's staffing numbers are already down from 1,200 last year, with 500 employees working out of Hong Kong and another 240 in Australia.
The company's Hong Kong parent, Richard Li's PCCW, is facing its own market realities, with a downgrade of its unsecured debt rating on Tuesday adding millions of dollars to its interest bill.
Moody's cut its rating to Baa2, one step short of its lowest investment grade rating, citing PCCW's $US4.2 billion net debt, which exceeds its market value, and declining sales.
Telstra has not escaped the Asian contagion either. A $1 billion write-down of Telstra's investment in Reach earlier this year triggered a share price fall to near all-time lows for Australia's largest phone company.
© 2003 Sydney Morning Herald
Share This