Advertisements

The figures behind Telstra’s 2022 transformation

Telstra chairman John Mullen used this week’s AGM to play up the telco’s ‘T22’ turnaround strategy – unveiled in June 2018 – dubbing it ‘the most radical and ambitious [transformation] being undertaken by any communications company in the world today’.

The three year strategy included the establishment of a new wholesale infrastructure company, Telstra Infraco, simplified product offerings and business structure and a cost reduction program.

Mullen told the AGM that in the year since launching T22, the company has reduced more than 1,800 consumer and small business plans to just 20 in market plans and done away with lock in contracts on new consumer and small business mobile and fixed plans.

The number of calls coming into Telstra’s contact centres has dropped by more than 15 million a year, with the company planning to reduce them by another 16 million by 2022.

That’s no doubt helping drive cost reductions too, with Mullen noting $1.2 billion of annual cost reduction since FY16.

Also helping on the cost reduction front – but not something Mullen was keen to play up – is the 6,000 direct employee role reductions this year.

While Mullen dubbed the reduction ‘a great concern’ given that ‘every employee is a person with a family, hopes and aspirations’ he noted that one of the biggest drivers was the transfer of Telstra’s fixed line business back to government ownership.

“While we have lost some 6,000 employees, NBN now employs 6,400 and many thousands of contractors, so overall employment has risen in the industry.”

Mullen shot down criticism of chief executive Andy Penn’s $5 million pay packet, saying the board had spent a ‘huge amount of time’ consulting to find an appropriate compensation scheme after being given a ‘first strike’ last year when shareholders rejected the company’s remuneration report.

He said share prices can’t be the only metric on which management performance is rated, and cautioned that ‘first class leadership’ is critical in the current environment of transformation and retaining top management depends on a number of things, including remuneration.

“When I was younger almost every executive aspired to being the CEO of a big public company. Today there is a real risk that the media scrutiny, populist criticism and governance challenges are starting to lead talented executives to look for alternative career paths such as private equity where they can build their careers out of the spotlight.

“Transparency and accountability are of course good things, but we need to be very careful that the pendulum does not swing too far and we lose top talent, as this will ultimately only be to the detriment of shareholders.

The company reported a drop in profit this year with Mullen laying part of the blame – some $600 million in negative recurring EBITDA headwind – on the NBN but promising FY2020 will be ‘pivotal’ for Telstra, with expectations of up to $500 million in growth.

Mullen saved much of his chairman’s speech to slam the NBN, saying it is a ‘state-owned monopoly that is going to cost the country more than $50 billion’ – while also accepting that Telstra must bear part of the blame due to its recalcitrance in helping the government at the time.

He says all Australians would have had access to better high-speed broadband at ‘a fraction of the cost’ if the NBN had not happened.

“It is always easier to comment with the benefit of hindsight, but it is my view that over the last 10 years private sector competition between strong players such as Telstra, Optus, TPG and others was always going to build 100MB broadband access and speed to the majority of the population of Australia, in an ongoing competitive landscape and at no cost whatsoever to the taxpayer.”



Categories: telco

Tags:

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Headlines
%d bloggers like this: