Telus president and CEO Darren Entwistle says a plan to reduce its workforce by 1,500 positions is essential for the telecom company if it plans to continue growing its business.
“I can tell you this is not a discretionary activity, but one out of necessity,” he said in an interview Thursday.
Telus (TSX:T) said the job cuts, which represent about three per cent of its overall staff complement, would come mainly through voluntary departures and early retirements, with roughly half of them occurring before the end of this year. The remainder will be completed during the first quarter, the company said.
All together, the Vancouver-based company expects to save as much as $125 million each year.
But the layoffs — which will be split evenly between unionized and management positions — raise awkward questions for Telus, which also proudly declared another hike to its dividend payment to shareholders.
The company said it will raise its dividend by five per cent to 44 cents per share, starting in January, after boosting its dividend earlier this year.
The two decisions shouldn’t be linked with each other, Entwistle said.
“Nothing could be further from the truth,” he said.
“If we elected not to raise the dividend we would still be pursuing this (cost savings) initiative.”
Entwistle, who returned to the CEO role over the summer after the sudden departure of Joe Natale in August, said cutting expenses is essential if Telus hopes to fund its growth plans, which include new technological investments.
He said the company is also having to deal with pursuing growth amid a generally soft economy and “economic duress” in the Alberta market as weak oil prices ravage that province’s economy.
As for the dividend increase, it simply continues part of a dividend growth model that was laid out nearly five years ago, Entwistle said.
“The commitment we made to shareholders at that time was (to) grow our dividend by a minimum of 10 per cent annually over the course of 2014, 2015 and 2016,” he said.
“If we didn’t honour that commitment, which we are fully capable of honouring, that’s not going to be positive for the stock price or the value of this organization.”
Union leaders were blindsided by the job reductions, said Lee Riggs, president of the Telecommunication Workers Union.
“We were completely unaware this was happening,” Riggs said. “We expect better from Telus.”
Telus also reported its third-quarter financial results, which showed profits and revenue grew in line with analyst expectations.
Net income and adjusted net income both were up about 2.8 per cent, rising to $365 million and $398 million respectively.
Adjusted income increased about three per cent to 66 cents per share, which was better than estimates of 64 cents per share from analysts polled by Thomson Reuters.
Revenue grew 4.2 per cent from last year, rising to $3.15 billion from $3.03 billion.
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Note to readers: This is a revised story that clarifies Telus has hiked its dividend by five per cent since its last dividend hike. A previous version said Telus hiked its dividend by 10 per cent, but did not specify that increase relates to what the dividend was in the same quarter a year ago.