Telco Giant Telstra Announces Next Step in Restructuring Plan

Telstra logos are seen outside the Telstra Melbourne headquarters on June 14, 2017 in Melbourne, Australia. Photo by Michael Dodge/Getty Images

Telstra is taking the next steps in its proposed corporate restructure with the telecommunications giant set to split into four branches under the new holding company, Telstra Group. The process is part of Telstra’s T22 strategy—a strategy started in 2018 to simplify operations and reduce costs by 2022.

Telstra CEO Andrew Penn said in a market release (pdf) on March 22 that the new legal structure would be an important milestone in the T22 plan.

“The new structure has been chosen as it delivers a modern, optimal long-term portfolio structure for the Telstra group of businesses, which will maximise flexibility and value realisation of our assets and deliver optimal outcomes for the Telstra Group as a whole,” Penn said.

The bulk of the break-up is expected to be completed by December 2021. Telstra shareholders will continue to control shares under equivalent ownership levels by distributing them to appropriate subsidiaries.

Telstra will now shift ownership and control of most physical infrastructure—except mobile towers—to their new InfraCo Fixed subsidiary. This includes aspects that underpin Telstra’s fixed telecommunications network, including cables and data centres.

Mobile tower infrastructure and assets will alternatively be operated and owned by a second subsidiary InfraCo Towers.

A third subsidiary, ServeCo, will be responsible for products and services, as well as active parts of network communication.

It also encompasses spectrum assets, like those relating to 4G and 5G services. A fourth entity will be created following the scheme’s completion to tackle all international business and undersea cables responsible for global internetwork communication.

“We started setting up InfraCo almost three years ago, and what has happened since has only reinforced the importance of the strategic decisions we made at the time,” Penn said. “The end of the impact of the NBN rollout on our financials is within sight, and the COVID-19 pandemic has demonstrated the critical importance and value of telecommunications infrastructure to the world.”

The T22 project and overall restructuring is attributed to a severe drop in revenue following the National Broadband Network (NBN) rollout by NBN Co—a company established in 2009 and owned by the Australian government.

Workers install cables for the Australian National Broadband Network at an apartment block in Sydney, Australia, May 30, 2017. REUTERS/David Gray/File Photo

As the NBN, Australia’s fibre optic network, undergoes its final phases of installation, older copper wires have become obsolete, which has impacted Telstra, who owned most of these cables.

In response, Telstra sees the restructuring as a potential monetisation opportunity, creating additional value for shareholders by creating a more detailed record of assets—once sprawled throughout Telstra’s monolithic organisation—which in turn can increase the value of infrastructure assets.

However, the restructuring does come at the cost of 8,000 jobs throughout the transition, including removing one in four executive and middle management roles to flatten the employee structure.

‘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,” the T22 plan states.