Up to 2,800 Telstra workers will be retrenched by year’s end, with Australia’s largest telecommunications carrier announcing plans to pare its workforce in an AI-driven “reset” of its enterprise arm including an overhaul of its Telstra Purple services business.

The package of reforms is designed to contribute to $350 million in cost savings as the company overhauls Telstra Enterprise – the company’s business-focused service arm that includes its Data & Connectivity business and Telstra Purple consulting arm – to “sharpen its focus on areas where it has the strongest differentiation, further improve delivery for customers and improve the cost base of the business,” the company explained in an ASX filing.

The job cuts – which will require consultation with employees and unions and come days after Telstra’s last enterprise bargaining negotiations with the Communications Workers Union (CWU) – are intended to help streamline the company’s enterprise product portfolio through measures including cutting the number of products in its Network Applications and Services (NAS) arm by “close to” two-thirds.

Telstra will also simplify its customer sales and service model “to better support customers”, the company said, and will “reduce the cost base” of its Telstra Purple technology services business – a euphemism for staff cuts in that people-focused business, which last October added over 500 employees with the $267.5 million acquisition of Melbourne based cloud firm Versent.

Telstra Purple is the company’s digital transformation consulting arm, with more than 2,000 certified local experts offering a range of services across network, data and AI, cyber security, Internet of Things (IoT), software development, cloud, and workplace collaboration.

The changes mark a significant step after a review of the Enterprise business that was flagged in February during Telstra’s latest half year results briefing, when CEO Vicki Brady said Telstra was “being challenged by cost pressure” and revealed that the NAS business would undergo a full review because it was “a long way from where we need it to be.”

Many believe that the company’s successful addition of artificial intelligence (AI) has facilitated some of the cutbacks, with AI now being used to improve half of Telstra’s key processes – including automatically detecting and resolving faults with fixed services, and helping “solve customer issues faster”.

Replacing employees with AI is a “cheap, sinister move that will worsen its already disgraceful customer service standards,” Macquarie Telecom group executive Luke Clifton said after the cuts were announced.

“Telstra doesn’t believe in its staff or its customers,” Clifton said. “It has outsourced staff overseas and now, rather than taking the lead on investing in AI to support staff and create better technologies for customers, it’s trying to replace them with artificial intelligence.”

Tough measures for tough times

The CWU’s latest negotiations included demands for “fair and transparent” performance ratings and fixed and guaranteed pay increases – a change from what the union called “Telstra’s discriminatory approach of linking wage outcomes to metrics and outcomes outside of employee control.”

Whether the cuts are a direct response to the negotiations is not clear, but the CWU warned that the cuts will be a “disaster for workers and customers”.

“You can’t axe 2,800 jobs and not expect it to have an impact on service delivery,” national assistant secretary James Perkins said, warning that they “will have a devastating impact on services.”

Telstra is already grappling with after recent complaint figures showed it was struggling to maintain service standards.

The changes are just the beginning of the review of Telstra Enterprise, the company said, with Brady promising that the company “will support” retrenched workers “through this change with care and transparency”.

Consultation on 377 Telstra Enterprise roles will begin “immediately”, the company said, “mainly from areas supporting the products and services to be exited in Enterprise.”

The company – which has previously flagged the need to explore new opportunities – will also move its Global Business Services function into other parts of the business as it works through the detail of changes that are expected to deliver $350 million of the company’s T25 cost reduction strategy by the end of next year.

The restructuring efforts will cost Telstra $200 to $250 million over the next two financial years.

Telstra also announced that it will update the terms for its postpaid mobile plans to remove its CPI-linked annual price review – potentially stabilising prices that are currently set to rise with annual CPI inflation that was recently pegged at 3.6 per cent.