Upbeat Telstra ponders life beyond NBN

Telstra shareholders have been sent a remarkably bullish message by CEO Andrew Penn, even as the telco’s latest financial numbers highlighted a steady attrition in revenue and profit.

The first half of fiscal 2021 has seen Telstra’s books go backwards on every meaningful financial metric but company watchers, accustomed to NBN-induced doom and gloom, on Thursday instead heard Penn flag a series of upbeat earnings targets.

Telstra CEO Andrew Penn is confident the worst is behind the telco giant.
Telstra CEO Andrew Penn is confident the worst is behind the telco giant. Credit:The Age, News, 02/02/2021 photo by Justin McManus.

Having been on the backfoot for the last four years, Penn’s “aspiration” of growing underlying earnings to between $7.5 billion and $8.5 billion by fiscal 2023 highlights his confidence that the T22 strategic restructure, first announced in mid-2018, is on track. It’s also a clear signal of Telstra pondering life after the NBN and potentially after Penn.

The COVID-19 pandemic may have added a layer of complexity but Telstra is on track to strip $2.5 billion of annual underlying fixed costs by fiscal 2022. Job cuts are part of that equation, however, Telstra’s moves to simplify its plans, the way it engages with customers service and the way it runs its operations have also played their part.

Advertisement

Telstra isn’t the leanest telco in the market nor has it completely secured the goodwill of its customers when it comes to getting their complaints addressed via the app. But there are signs of progress and the announcement on Thursday to bring all of Telstra’s retail stores in-house is further proof of it trying to provide as consistent a customer experience as possible.

Telstra has 166 branded stores run by independent licensees, another 104 run by Vita Group and 67 stores that it operates directly. By 2025 all of the stores will be run by Telstra, with the independent operators and ASX-listed Vita, which saw its shares drop close to 30 per cent on the news, shown the door.

The move will almost certainly see some stores close and draw fire from customers. But the quest for unified experience is now an integral part of Telstra’s post-T22 roadmap, more details on which will be revealed in November.

While the issue of high wholesale NBN prices and the inevitable friction between NBN Co’s push to increase its average revenue per user and Telstra’s efforts to eke out margin as a broadband reseller will keep bubbling away, the next 12 months are going to be dominated by the impending 5G spectrum auction and the sale of Telstra’s mobile infrastructure.

Telstra is pitching its 5G mobile wares at an average price point of $65, a level that it believes can be maintained for the time being. The premium is largely underpinned by coverage and the speeds Telstra says it can offer to its 5G customers.

However it won’t take long for Telstra’s rivals, especially Optus, to start eroding that premium. TPG Telecom may still have its hands full in integrating the respective Vodafone and TPG businesses but it will join the party in earnest.

Maintaining the premium will require Telstra to get its hands on as much 5G spectrum as it can at the auction this year and then ensure it can use it efficiently enough to stay a step ahead of the competition.

Business Briefing

Start the day with major stories, exclusive coverage and expert opinion from our leading business journalists delivered to your inbox. Sign up for the Herald‘s here and The Age‘s here.

Most Viewed in Business

Source: Thanks smh.com