Telstra announced a far-reaching restructuring plan aimed at simplifying its operations and product offering, improving customer service and reducing costs by AUD1 billion ($740 million) by mid-2022.
CEO Andrew Penn (pictured) said in a statement the Telstra2022 strategy would “fundamentally change the nature of telecoms products and services in Australia by eliminating many pain points for customers”.
It will also eliminate the roles of 8,000 employees and contractors with around one in four executive and middle management roles due to go as Telstra cuts between two and four layers of management. The layoffs form part of an effort to deliver an extra AUD1 billion in cost savings on top of an existing goal to cut outlay by AUD2.5 billion by the end of fiscal year 2022, the 12 months to end-June 2022.
Telstra’s strategy includes steps to streamline its operations and products. On 1 July, the operator will create a wholly-owned business unit called Telstra InfraCo, which will comprise its fixed network assets, its NBN Co commercial works activities and Telstra Wholesale, with a total workforce of about 3,000. Penn said the move will enable the operator to “better optimise and manage these assets”. I
The strategy also called for monetising up to AUD2 billion in assets over the next two years to strengthen its balance sheet. Telstra also said it will retire more than 1,800 consumer and small business plans and replace them with 20 core plans in a move to improve customer experience. It aims to move all customers to the new product range by 30 June 2021.
“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,” he said.
Penn added the rate and pace of change in the industry is increasingly driven by technological innovation and competition: “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 telecoms company.”
Penn is facing increased pressure from shareholders who are demanding he take action over the operator’s declining profitability. Net profit in fiscal H1 2018 (the six months to end-December 2017) fell 5.8 per cent year-on-year to AUD1.7 billion on revenue of AUD14.5 billion, up 5.9 per cent.
Last month Penn warned the industry is facing increased competition which has led to stronger pressure on fixed and mobile margins, in an earnings guidance update which predicted mobile EBITDA would drop in fiscal 2018.