Telstra outlines new strategic plan, will establish standalone infrastructure unit

20 Jun 2018

Australian fixed line incumbent Telstra has announced a new strategy under which it aims to ‘lead the Australian market by simplifying its operations and product set, improving customer experience and reducing its cost base’. The telco’s strategy, which has been given then name ‘Telstra2022’, comprises four key pillars, with one of the most notable being the decision to establish a standalone infrastructure business.

Effective from 1 July 2018, Telstra will create a wholly owned standalone infrastructure business unit – Telstra InfraCo – which will comprise its fixed network infrastructure, including data centres, non-mobiles related domestic fibre, copper, HFC, international subsea cables, exchanges, poles, ducts and pipes. The service offered over these infrastructure elements will be sold to Telstra itself, as well as to wholesale customers and NBN Co, the company overseeing the rollout of the National Broadband Network (NBN). Telstra InfraCo will also comprise Telstra’s commercial works activities related to the NBN, as well as Telstra Wholesale, with a total workforce of approximately 3,000. The new unit is expected to control assets ‘with a book value of about AUD11 billion [USD8.1 billion]’ and have annual revenues and EBITDA of approximately AUD5.5 billion and AUD3 billion, respectively.

Alongside the creation of Telstra InfraCo, the Telstra2022 strategy sets out to radically simplify the company’s product offerings. To that end, from next month the carrier intends to introduce a new range of post-paid plans, while four more ‘major product and service experiences’ will be progressively announced in the lead up to June 2019. Details of these new offerings are being kept confidential for now ‘for competitive reasons’. All customers are expected to be moved to the new product range by 30 June 2021, and Telstra has said it ultimately intends to reduce the number of consumer and small business plans from the 1,800 it currently has to just 20.

Rounding out the strategic plan, the other two key pillars are: a simplification of Telstra’s structure, with the company saying that next month it will announce and implement a new streamlined operating model and organisational structure; and an ‘industry leading cost reduction programme’, and portfolio management, with Telstra intending to monetise assets of up to AUD2 billion over the next two years to strengthen the balance sheet, while it has increased its target for its productivity programme by a further AUD1 billion to reduce underlying core fixed costs by AUD2.5 billion by FY 2022. One consequence of the strategic plan highlighted by the company is an expected net reduction in employee and contractor numbers of 8,000, including removing one in four executive and middle management roles to flatten the structure.

Commenting on the matter, Telstra CEO Andrew Penn said: ‘We will take a bolder stance and use the disruption in the telecommunications industry to lead the market for the benefit of our customers, employees and shareholders … The rate and pace of change in our industry is increasingly driven by technological innovation and competition. In this environment traditional companies that do not respond are most at risk. We have worked hard preparing Telstra for this market dynamic while ensuring we did not act precipitously. However, we are now at a tipping point where we must act more boldly if we are to continue to be the nation’s leading telecommunications company.’

Australia, Telstra (incl. Belong)