In 2022, telecom giant Telstra (ASX: TLS) launched its T25 growth strategy focusing on improving customer experience and becoming more digital-first.
In line with that, the Company is set to let go of up to 2,800 of its direct workforce, with the majority to be eliminated by the end of CY24. Telstra will also update its customer terms for its postpaid mobile plans to remove the annual CPI (consumer price index)- linked price review. Instead, Telstra will manage pricing based on updates provided.
As per CEO Vicki Brady, these measures are necessary to ensure Telstra can continue making the investments needed to support its growth in data volumes on its networks and deliver improved connectivity for customers across the country.
She commented, “Telstra’s ongoing investment in infrastructure, technology, innovation and service for our customers drives growth and underpins Australia’s digital economy, contributing to the prosperity of the nation.
“This is occurring within a dynamic environment, with an evolving competitive landscape, rapid advances in technology, changing customer needs, and the ongoing inflationary pressures facing all businesses.”
In H1 FY24, Telstra reported a total income of $11.7 billion, largely flat on H1 FY23. Its reported EBITDA was $4 billion, a 3.8% uptick, with its underlying EBITDA being $4 billion, a 3.1% increase. Telstra’s NPAT rose by 11.5% to $1 billion even as its NAS (Network Application and Services) business struggled to perform.
Even so, Telstra reiterated its FY24 guidance and provided FY25 Underlying EBITDA guidance of $8.4 to $8.7 billion.
With just over 12 months remaining to complete its T25 strategy, the Company is resetting its Enterprise business to simplify its operations and improve productivity. These will sharpen its focus on areas where it has the strongest differentiation, improve customer delivery, and improve the business’s cost base.
These include a streamlined product portfolio, reducing the number of NAS products in the market by close to two-thirds, a simplified customer sales and service model to better support customers, and a reduction in the cost base of the Telstra Purple tech services business, especially NAS, aligned with revenue and changing market dynamics.
For its pricing, the approach will provide greater flexibility to adjust prices at different times and across different plans based on their value propositions. As a result of this change, Telstra will not be making a CPI-linked annual price change to postpaid mobile prices in July 2024.
As for the headcount reduction, consultation on 377 of those roles would begin immediately, mainly from areas supporting the products and services to be exited in Enterprise. Moreover, Telstra will look to AI to support teams.
Brady said, “I appreciate the uncertainty proposed changes like this can create for our people and we will support them through this change with care and transparency. As we propose specific changes, we will talk them through with our teams and union representatives first.”
With these actions, Telstra noted that it expected to achieve $350 million of its T25 cost reduction ambition by the end of FY25, even in the face of rising inflation. Telstra expects one-off restructuring costs of $200 – $250 million across FY24 and FY25.
This operational reset and its larger T25 strategy are geared towards ensuring that Telstra is well-placed for success come 2030.
Alinda is a Business Reporter for The Sentiment
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