Telstra to split into three as part of T22 strategy

By Dylan Bushell-Embling
Monday, 16 November, 2020

Telstra to split into three as part of T22 strategy

Telstra plans to restructure its organisation into three separate legal entities as part of its wide-ranging T22 transformation strategy.

The company has proposed to split off its fixed infrastructure assets into a new InfraCo Fixed division, while the separate InfraCo Towers would own and operate Telstra’s passive or physical mobile tower assets.

Meanwhile, the company’s retail operations will be consolidated into ServeCo, which will own the active parts of the network, including the radio access network and Telstra’s extensive spectrum assets.

Telstra already spun off its infrastructure assets into Telstra InfraCo in 2018. Telstra CEO Andy Penn said with InfraCo now a fully operational standalone business unit and the nbn rollout effectively complete, the company is ready to take the next step in realising its T22 ambitions, which include “monetisation of our infrastructure assets” where appropriate.

“The proposed restructure of our organisation provides us the optionality and opportunity to better realise the value of our infrastructure assets and, in an evolving and competitive market, helps us focus on continuing to provide the best experience to our customers,” he said.

“We have created a set of key principles for the Intercompany Agreements between InfraCo and ServeCo that supports strong and sustainable earnings for both entities. These agreements are designed to maximise value for Telstra shareholders.”

Penn said InfraCo Towers would own and operate the largest network of mobile tower sites in Australia.

“InfraCo Towers will enable greater utilisation and commercial use of our tower assets, and ultimately drive more value for our shareholders,” he said.

“Telstra intends to start seeking investment from third parties while maintaining control of our strategic towers and preserving our competitive differentiation for Telstra’s mobile business. We anticipate this will begin in 2021 and will follow a similar timeline to the rest of the restructuring process.”

But he said the restructure process still has a number of prerequisite steps, including consultation with employees, unions and shareholders.

“We are very conscious of the many stakeholders, including shareholders, who will have an interest in these changes and that is why we have announced our intentions today, well ahead of implementation, so we can undertake a comprehensive consultation program to explain the many benefits this structure delivers,” Penn said.

“We will work very closely with our partners, our people and other stakeholders throughout this process, and will provide an update on progress at our Half Year Results in February 2021.”

Penn has meanwhile reconfirmed Telstra’s guidance for FY21, which includes returning to underlying EBITDA growth by FY22.

The T22 strategy is expected to deliver $2.5 billion in net productivity by FY22, of which $1.8 billion has been achieved from FY16 to FY20, with another $400 million expected in FY21, the company said in a market update.

This estimate includes the costs of absorbing all inflation and re-investment as well as COVID-19 impacts.

Image credit: ©

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