Telstra targeting A$500M in cuts and 5G growth

Telstra aims to shed A$500 million ($365.8 million) in costs, sell off further assets and become a major consumer tech retailer under its latest transformation plan.

Unveiling the T25 strategy on Thursday, CEO Andy Penn said it was aimed at driving growth, following on from the efficiency-focused T22 scheme."We have simplified our operations and products, improved customer experience and reduced our cost base," he said.

Figure 1: Good call? Telstra wants to be a full service tech company - rather than a telco.
(Source: Akshay Chauhan on Unsplash)

With a year still to run on T22, Telstra says it has already hit 80% of its targets, removing A$2.3 billion in cost, shedding a third of its workforce and halving the number of customer complaints.For T25, CFO Vicki Brady said the company planned to eliminate A$500 million in fixed costs over the three-year period.

Speculate to accumulate

Much of this would come from lower IT costs following Telstra's investment in a new IT stack, enabling it to shed legacy systems and consolidate platforms, she said.

Additionally, the company would boost efficiency in consumer billing, customer assurance and activation functions.Telstra is banking on revenue uplift from its 5G network, which is expected to cover 95% of the population by 2025. By that time it expects the number of metro cells to have doubled and that the network will deliver 80% of all mobile traffic.

"We will have extended our 4G coverage to 100% of our network by 2024, enabling us to continue to lead in composite coverage, speed and performance for 4G and 5G as we close 3G," Penn said.He said customer service would be a key pillar of the program, with the aim of ensuring 90% of customer inquiries are completed in a single transaction.

IT crowd

In a new departure, the company plans to become "a full service tech retailer," able to meet consumers' technology needs and support them across the whole technology lifecycle.It is bringing its retail store network in-house to create one of the largest corporate-owned retail networks in the country."We see significant upside in this scale to expand both our range and the margin we capture through hardware," Penn said.Besides hardware, he said Telstra was eyeing margin growth in NBN resale, fixed wireless, in-home services and its new energy retailing business.

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CFO Brady signaled that infrastructure asset sales are also on Telstra's agenda, citing the successful monetization of A$2 billion of assets under T22. In the biggest deal, just completed, it disposed of 49% of its stake in the towers business.

She said Telstra's fixed-network unit, Infraco Fixed, was positioned for "future monetization and other opportunities."In the current financial year Telstra was targeting cost reductions of A$430 million from digitization, lower IT and network costs, vendor optimization and labour efficiencies, she said.

Telstra's stock price rose 0.51% Thursday on release of the T25 plan and news of higher dividends.

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— Robert Clark, contributing editor, special to Light Reading