Inside Telstra's new infrastructure business plans

Inside Telstra's new infrastructure business plans

To be launched on 1 July

Credit: Dreamstime

Telstra (ASX:TLS) has announced plans to create a new standalone infrastructure business, Telstra InfraCo, as part of the telco's 2022 strategy.

According to an announcement to shareholders on 20 June, Telstra's InfraCo will "drive performance and set up optionality" post the National Broadband Network (NBN) rollout.

Telstra InfraCo will be launched on 1 July as a wholly owned standalone infrastructure business unit with its own CEO reporting to Telstra CEO Andrew Penn.

It will comprise Telstra’s NBN Co commercial works activities and Telstra Wholesale, including the management of Telstra's more than 200 wholesale customers.

The new business unit will also comprise of the telco's fixed network infrastructure which includes data centres, non-mobile related domestic fibre, copper, hybrid fibre-coaxial (HFC), international subsea cables, exchanges, poles, ducts and pipes.

“As technology innovation is increasingly relying on connectivity, the role of telecommunications infrastructure is becoming more important," Penn said. "There is virtually no technological innovation happening today that does not rely on a high quality, reliable, safe and secure telecommunications network."

Telstra InfraCo services will be sold to Telstra, wholesale customers and the company behind the NBN rollout NBN Co. The unit will employ 3,000 staff and is expected to have annual revenues of about $5.5 billion and EBITDA (earnings before interest, tax, depreciation and amortisation) of about $3 billion.

The new business unit will reinforce the discipline with which capital allocation occurs across the group, the company stated.

"Telstra InfraCo will provide significant optionality for Telstra in the future for a potential demerger or the entry of a strategic investor once the NBN rollout concludes."

Telstra's mobile network assets will not be part of the new business unit, that includes spectrum, radio access equipment, towers and some elements of backhaul fibre, which will remain integrated with Telstra’s core customer segment focused business which is also important for Telstra’s mobiles business as it executes its 5G strategy.

Telstra has also announced the creation of Telstra Global Business Services group which is set to consolidate all large scale “back of house” processes and functions using technology to reduce costs for large repeatable functions.

This is part of a new operating model and organisational structure to be announced in July. This will result in 8,000 jobs being slashed among employees and contractors. However the company said it will invest in 1,500 new roles to build new capabilities.

“We are creating a new Telstra that is able to continue to lead the market. In the future our workforce will be a smaller, knowledge-based one with a structure and way of working that is agile enough to deal with rapid change. This means that some roles will no longer be required, some will change and there will also be new ones created,” Penn said.

Simpler plans

As part of the strategy of simplifying Telstra's product offerings, the telco will retire all of its more than 1,800 consumer and small business plans and introduce 20 core plans backed up by an effortless digital service that removes complexity and provides cost certainty – addressing key pain points for customers.

"By June 2019, Telstra customers will experience a radically simplified experience made possible by new intuitive digital platforms, with all customers being moved to the new product range by 30 June 2021," the company told shareholders.

B2B customers will also benefit from less complexity by reducing the existing product portfolio by more than half within three years.

“Customers will have more choice than ever in a post-NBN world with increasing mobile competition," Penn said.

"We are committed to leading the market in a period of transition and positioning ourselves to create a strong platform for growth. At its core, this strategy is about placing customers at the centre of everything we do and delivering simpler, more flexible products with a beautiful digital service experience,” he said. 

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