Vita Group agrees to Telstra remuneration cuts in exchange for more stores

Vita Group has reached an agreement with Telstra that will see cuts to remuneration go ahead in exchange for a larger store footprint.

Telstra implemented cuts to remuneration on commission for store partners by 10 percent beginning 1 July 2017, with another 10 percent cut to follow in FY19 and FY20. While the first 10 percent cut will remain in place, Vita said that Telstra has made "no specific decisions" about cuts after this financial year.

Vita noted that Telstra still had the right to amend remuneration in the future, but that it was comfortable with the current model this year. Vita has also agreed to forego some of its legacy remuneration.

In exchange for remuneration cuts, Telstra has increased the number of stores Vita can operate to 110, and will increase that number to 115 in 2019. Vita currently operates 105 stores, and is Telstra's only master licensee partner.

Vita has said that it has extended its master license agreement with Telstra to 2023 with the option to extend annually.

Telstra revealed the remuneration cuts in May in response to "margin pressures faced by Telstra in a very competitive mobility market, and the ongoing impact of the NBN rollout". Following the announcement, Vita's shares were hammered from $2.23 to a low of 90 cents a week later. Vita's shares have recovered to $1.57 at the time of writing.

Cost-cutting measures have also hit Telstra, which revealed a sweeping restructure in June that could see up to 1400 staff let go over the next six months. The telco giant will attempt to cover a $2-3 billion earnings gap that will be left when the construction of the NBN is completed.

Vita chief executive Maxine Horne said Telstra had struck the right balance with its remuneration agreement.

"With this key milestone achieved, the Vita team are well positioned to deliver long-term value to our customers, our team members, and of course to Telstra and our shareholders. I'd like to thank our shareholder for bearing with us whilst we completed these important negotiations."

Looking ahead, Vita said it would make further investments in consultative selling within its Telstra stores, as most customers only have one active Telstra services at a time. Horne said that it will also look to address the large variability among individual KPI performances from staff, and support Telstra's push into the smart home market. Horne also said that Vita will explore opportunities outside of the telco market.