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Jakarta Post

'Tough but necessary': Indosat cuts 677 jobs to boost efficiency

  • Riska Rahman

    The Jakarta Post

Jakarta   /   Mon, February 17, 2020   /   05:56 pm
'Tough but necessary': Indosat cuts 677 jobs to boost efficiency A customer talks with a service staff member at an Indosat counter. (Tribun Timur via Kompas.com/Muh. Abdiwan)

Telecommunication service provider PT Indosat has taken a further step to improve its financial state through the layoff of almost 700 employees in recent days.

In a statement obtained by The Jakarta Post over the weekend, Indosat director and human resources chief Irsyad Sahroni said the company was laying off 677 employees as part of changes to its organizational structure to be more agile and focus on customers and market demand.

“We have thoroughly reviewed all possible options and have reached the conclusion that we must take this tough but necessary action to be sustainable and grow,” he said.

He went on to say that the privately-owned company was taking a fair approach in line with the prevailing laws and regulations and offered a better compensation package than required by law.

Read also: XL Axiata sales towers to improve efficiency, reduce costs

As of Friday, around 80 percent of the impacted employees had accepted the package, he said.  

The publicly listed company booked a loss of Rp 284.6 billion (US$20.8 million) in last year’s first nine months, a stark improvement compared to the Rp 1.5 trillion loss recorded in the same period in 2018.

The company’s total revenue rose by 12.4 percent year-on-year (yoy) during the same period to Rp 18.9 trillion, while total costs dropped 4.2 percent to Rp 17.3 trillion.  

The company’s stocks, traded at Indonesia Stock Exchange with code ISAT, plunged 2.38 percent on Monday, while the bourse’s main gauge, the Jakarta Composite Index, was stable, closing up 0.01 percent.

Irsyad said the job cuts, albeit tough, would improve the company’s performance. They would also help Indosat remain competitive amid serious disruption and optimize its services to provide a better customer experience.

Throughout the first nine months of 2019, the company recorded Rp 1.29 trillion in employee cost, down 23.35 percent yoy. The employee cost accounted for 7.42 percent of the company’s total expenditure during that period.

Securities firm Jasa Utama Capital equity analyst Chris Apriliony said the reorganization could have a positive impact on the company’s finances and help the company achieve a profit.

“However, the company would need [more time] before seeing a positive impact [of the layoffs] in its financial performance,” he told the Post by text message.

In the meantime, he believed the company could book a profit in the short term, albeit temporary, thanks to last year’s tower sales. 

In October, Indosat had sold 3,100 telecommunication towers to two local communication tower operators, PT Dayamitra Telekomunikasi (Mitratel) and PT Profesional Telekomunikasi Indonesia (Protelindo), for Rp 6.39 trillion. Indosat then leased back the towers for 20 years from the two buyers.

Meanwhile, Indosat workers’ union head of public relations and media Ismu Hasyim told the Post on Monday that most of the laid-off employees were from the network operations division.

Read also: Indosat sells 3,100 telecom towers for Rp 6.39 trillion

“About 200 people who were laid off came from that division, because the company said it would outsource [the employees’ tasks] to other companies,” he said, adding that he suspected such a strategy was taken following the sales of its telecommunication towers last year.

Ismu also said some of the laid-off employees had opted not to take the package for personal reasons. However, others refused the package completely as they rejected the company’s decision on the job cuts.

“More than 102 of them have come to us, and we [the workers’ union] are helping them communicate with the management,” he said.

Aside from providing a severance package, Irsyad said, the company was also working to provide opportunities for the laid-off employees to continue working for its partner companies.

However, it seems not all of the affected employees knew about the offer, and Ismu said all of them had yet to receive a written agreement on the offer.

“Some of them did receive a verbal offer, but I told them there’s no formal offer if there’s no written agreement,” he said.