A year after digesting Dodo and Eftel, it says the restructure is due to “role duplication experienced from the acquisitive growth of the company over the last two years.”
In an announcement to the ASCX M2 said its “acquisition integration program” has recently identified approximately 150 roles across administration, customer service, technology, provisioning and sales that “may” become redundant.
The news comes less than six months after over 100 staff lost their jobs after a ‘partial restructure last October (CommsWire, 29 October 2013).
The company said those sackings were as a consequence of acquisitions completed in May 2013. That was when it acquired Dodo for $203.9 million and Eftel for $44.1 million. It also acquired Primus in 2012, for $192 million.
“Following an extensive period of review, the company’s integration program has identified a number of roles across administration, customer service and sales which are redundant in the merged business,” said M2 CEO Geoff Horth at the time.
Apparently they were not enough. The company’s ‘acquisition integration program’ is looking for deeper cuts. Horth said that “any proposed changes will be discussed with team members in the consultation process, during which time the company will confirm the structure required to support the future operational requirements of the business.
“We very carefully consider any change that may affect our team and we enter into the consultation process with the aim of minimising any potential impact on the team and maximising redeployment opportunities. This decision was not made lightly and we take any impact on our team very seriously.”
Sounds like the decision has already been made, and that the promise to “consult” is – as always – a sop to affected employees. M2 currently employs around 3000 staff, mostly in Australia, with many in New Zealand and the Philippines.
As many as 5% of them are about to be told that their services are no longer needed, and many Australian jobs will be relocated to the lower cost base of the Philippines. Goldman Sachs analyst Raymond Tong said in a research note that the layoffs have the potential ti save M2 up to around $8 million a year.
Just two months ago, releasing the listed company’s half yearly financial results, said that “significant progress” had been made on the integration of Dodo and Eftel, and that M2 had rationalised systems and processes to simplify the business.”
That process is obviously continuing. The integration of Eftel and Dodo did not seem to unduly affect M2’s financial performance – revenues were up 66% over the same period in the previous year (largely as a result of the acquisitions), EBITDA was up 38%, and net profit after tax up by 26%. Revenues for the six months were $506 million.
M2’s guidance for the current financial year puts it on track to break a billion dollars in revenue next year, putting it into the same league as iiNet and TPG.
These three companies have pulled away from the pack, and now firm the second tier of Australian telcos (though you could argue that Telstra is in a tier of its own).
Horth blamed the restructure largely on the NBN, telling Fairfax Media that the NBN was a driving force in pushing telcos to cut costs. "We've got good organic and acquisitive growth in this business but this is increasingly becoming a pure commodity industry.
"Fundamentally I'd have to say it's a bit of a precursor to the NBN as well because the realisation that we all become resellers in an NBN-world is a very important one. So to make good margins when you're sweating someone else's infrastructure you just have to be very, very efficient."
That is at odds with what the company said when announcing its priorities for 2014, in an investor presentation after the release of its most recent financial, in which it said it would ‘”seamlessly transition to the NBN”. Those losing their jobs will wonder at just how ‘seamless’ this process will be.
Investors weren’t happy with the news. Shares fell 2.11% on the ASX yesterday, to $5.57, and are now down from a high of $6.61 in February. The market has certainly sensed something is not right.