Facing serious competitive pressures in Singapore, StarHub has unveiled an ambitious transformation plan that it says will boost efficiencies, lower opex and speed up decision-making processes – but it also means sacking at least 300 employees.
The strategic transformation program aims to cut costs in procurement activities, leasing costs, rationalizing spending in network and systems repairs and maintenance and overall sales and distribution expenses. Part of that will result in approximately 300 full time employees – primarily in non-customer facing roles – will be made redundant. StarHub added that “on-going natural attrition and tighter management of contractor roles” will result in additional redundancies.
All up, StarHub says the transformation plan will add up to S$210 million in savings over a three-year period starting in 2019. The plan will incur a one-off restructuring cost of around S$25 million, which includes funding to support outplacement, training and coaching, although StarHub says the restructuring cost won’t impact its guidance for FY2018.
The transformation plan isn’t just about cutting costs – the new, streamlined StarHub will also invest in new businesses (its recently cyber security initiatives being an example), as well as digitalization initiatives to transform customer experience, ICT solutions for enterprise customers, and of course its fixed and wireless network infrastructure.
The reason for the restructuring is, put simply, all about staying competitive in a demanding telecoms market where profitability is getting harder every day, said StarHub CEO Peter Kaliaropoulos.
“The intense competitive ferocity right across the market, new entrants, lower voice revenues, thinning margins for fixed broadband services, high content costs for pay TV operations and high market penetration for mobile and fixed services, has necessitated efficiency optimization initiatives as part of the strategic transformation plan,” Kaliaropoulos said in a statement. “Technological innovation and competition are redefining how we deliver services to our customers and we at StarHub need to transform our operating model, otherwise we will face greater risks in the future.”
Kaliaropoulos said StarHub’s revised operating structure will improve its competitiveness and agility, as well as increase accountability and enable the telco to deliver better customer experiences.
StarHub’s move is the latest example of telcos realizing that traditional telecoms business structures and processes simply won’t be able to keep up in the coming digital age, and that transformation of some kind is going to be necessary in order to thrive as well as survive.
This isn’t news – telcos have been attempting to transform themselves for years, but rarely successfully, and often due to ingrained cultural problems that have proven highly resistant to the amount of transformation required.
That said, there are also indications that at least some telcos are finally fighting back and figuring out a transformation strategy that works for them (Turkcell has emerged as a star example in recent weeks).
While it’s naturally too early to tell whether StarHub can execute its own plan, and whether its plan is sufficient, it does have the advantage of operating in a market whose government and independent regulator share the same overall ambition of transforming Singapore into a cutting-edge digitalized ‘Smart Nation’. In the past year alone, the IMDA has launched a number of initiatives to help enterprises of all stripes go digital as painlessly as possible.