Telstra slashes $500M costs in T25 plan

Telstra is planning to slash a further $500 million in costs after revealing its new T25 strategy, which focuses on customer experience, shareholder growth and marketing itself as ‘the place to work’. 

Telstra CEO Andrew Penn said its T22 strategy had fundamentally transformed Telstra and T25 now paves the way to deliver growth and a further $500 million in cost reductions on top of the $2.7 billion committed for T22.  

“T22 has been one of the largest, fastest and most ambitious transformations of a telco globally and today we are a vastly different company,” he said.

“This means we’re poised for growth as our society and economy increasingly digitises and we all work, study, transact and get our entertainment online. These fundamental shifts, together with T25, will underpin our future growth and shareholder value.”

Penn said T25 marked its transition from transformation to growth in a strategy that focuses on customers, people, shareholders and supporting the creation of a ‘vibrant digital economy’.

“Our financial ambition is to maintain leading operating cost metrics for a full-service telco through capex discipline, efficiency and cost reduction from completing the decommissioning or exiting legacy IT systems,” he said.  

Penn highlighted the restructure of Telstra with a new holding company and four key subsidiaries – Infra Co Fixed, Amplitel (InfraCo Towers), Telstra Ltd (ServeCo) and Telstra International were the key final step in T22 to establish a standalone infrastructure business to drive performance and “set up optionality”. 

“All steps in the restructure process are progressing well. We are optimistic of finalising the restructure before the end of T22 and we expect to be well-positioned to progress to the next stage in preparing for monetisation opportunities as part of our T25 strategy,” Penn said.  

“We also know the government is considering amendments to legislation, so that it appropriately reflects our new structure once it is implemented.” 

Customer experience was an area the telco highlighted as one pillar of T25 that will focus on using technology, artificial intelligence and analytics to provide a more personalised experience with products and services, and to predict and resolve issues.

The telco also plans to ramp up its Telstra Plus rewards program, which has 3.5 million customers, and under T25 it will be expanded into a full sales and marketing channel.  

In tandem, Telstra has also structured its enterprise business to have a greater alignment with technology service experts in specific industries, focusing on telco products, edge compute, cyber security, cloud, AI and IoT; delivered and managed by Telstra Purple.  

“Through T25, our enterprise customers will continue to benefit from our work to reduce product complexity, improve our sales capability and customer support. We expect these changes to contribute to mid-teens EBITDA [earnings before interest, depreciation and amortisation] margins for our NAS business,” Penn said.  

The telco expects with its continued investment in 5G and substantially increasing its regional coverage, 80 per cent of all mobile traffic will be on 5G by FY25, as the telco continues its 5G network rollout and plans to double metro cells to increase density for greater capacity and speed.

“Increasingly it is not just the physical network where we can differentiate,” he continued. “Historically key aspects of functionality in networks has been relatively static, but now with software, we can dynamically manage all aspects of our network experience and boost security with our 5G network and edge compute capabilities so customers, from those at home to big businesses, can rely on safe and secure services.

“Across our network and tech platforms, we are also building ever-increasing resilience with the creation of small blast zones and automated orchestration.” 

On the ‘place to work’ front, Telstra stated that under T22 it moved almost 17,000 employees to work in Agile, and under T25, it will expand its BizDevOps approach to bring developers, operational teams and business teams closer to customer needs.  

Penn also pledged for the telco to continue investing in new skills and a flexible workplace to attract the best talent. 

“We’ll also continue investing in our digital leadership including improving our products, processes and experiences with proactive and predictive artificial intelligence and machine learning capabilities,” he said. “We expect to have 100 per cent of key business applications using API [application programming interface] first architecture and 90 per cent of applications on public infrastructure by 2025.” 

During FY21, Telstra boosted its profit to $1.9 billion after an on-market share buy-back of up to $1.35 billion.

The telco giant saw its net profit increase by 3.4 per cent as it plans to return 50 per cent of the net proceeds from its InfraCo Towers sale to shareholders this financial year. 

The profit rise comes as Telstra’s revenue dipped by 9.1 per cent to $21.55 billion while EBITDA shrunk 14.2 per cent to $7.6 billion.