Telstra Changing Corporate Structure

Telstra is moving forward with restructuring plans

The telco market has seen some struggles over the past years, especially for the big companies. Telstra is responding to the shrinking market by changing their corporate structure.

For decades, Telstra has operated on a vertical integration model, controlling everything from products to customer service all under the same entity. This resulted in a hefty, perhaps bogus corporation with hardly any independence between departments.

Now, with digital companies challenging the traditional telco market in Australia, Telstra have to respond and have chosen restructuring. The telco giant will split into separate, almost independent divisions – InfraCo Towers, InfraCo Fixed, ServeCo and Telstra International.

However, these divisions will still fall under one umbrella – Telstra Group.

In this article, we’ll discuss Telstra’s recent restructuring moves to get you up to speed.

Telstra’s T22 strategy in motion

Back in 2018, Telstra introduced their T22 strategy. The strategy focused on four points – two of those points were to simplify product offerings and to simplify Telstra’s structure.

Since then, Telstra have made several moves to simplify the company. From revamps of SIM only plans to handing off NRL and AFL live games over to Kayo Sports. Telstra’s new no frills approach to SIM only plans includes its latest revamp of postpaid plans – the telco now offers upfront plans instead.

Obviously, the telco sees potential in simple products and lineups that offer customers exactly what they need. Such a strategy has worked wonders for Mobile Virtual Network Operators (MVNOs) over the years, and the big telcos have been taking notes.

In fact, just last year, Belong contributed heftily to Telstra’s bottom line. The smaller, simpler, fully digital Telstra MVNO accounted for 154,000 of the 240,000 new postpaid mobile customers Telstra added. Also, all 80,000 of Telstra’s new broadband customers were Belong customers.

Telstra simplifies its holdings further

As far as infrastructure, Telstra has announced their willingness to sell off their towers. Such an idea was nonexistent several years ago, but the telco has finally embraced the opportunity.

To further simplify the telco, Telstra has also announced that it will delist from New Zealand’s stock exchange. The telco will trade on the ASX alone, and New Zealand investors would be allowed to keep their stocks and trade on the ASX as well.

And late last year, Telstra indicated that there were plans to restructure the telco by splitting it up into three divisions. Back in 2018, the telco had already separated its infrastructure assets as a standalone division called InfraCo, getting the ball rolling to what we’re witnessing now.

Now, Telstra is moving forward with their restructure plans. The telco will divide itself into four subsidiaries instead of three, all under one umbrella:

  • InfraCo Fixed
    All of Telstra’s passive physical infrastructure that are the foundation for their fixed telco networks will be owned and operated by InfraCo Fixed. This includes everything from ducts and pipes to subsea cables and data centres.
  • InfraCo Towers
    All of Telstra’s passive physical mobile towers will fall under InfraCo Towers. With plans to monetize these towers in the near future, it will be interesting to see how this division unfolds.
  • ServeCo
    For products, services, and customer interaction, ServeCo will have control. ServeCo even goes beyond that, by owning and running the active parts of Telstra’s network, as well as spectrum holdings, radio access network equipment on mobile towers, and other key elements of the Telstra network.
  • Telstra International
    This division will own and operate Telstra’s international business and subsea cables.

All of these divisions will operate independently, but will still fall under the Telstra Group umbrella. This gives shareholders the opportunity to still hold shares in the telco as a whole, even while each branch operates in its own interest.

Final words

Many believe Telstra’s restructuring moves are long overdue. However, it’s likely not too late, and investors tend to feel that way as well. Following the telco’s recent announcement to delist from New Zealand by 18 June, Telstra’s share price rose over 2.4 percent. And since the telco indicated plans to split into multiple subsidiaries, share price has seen healthy growth as well.

While Telstra’s restructuring might be great for business, we’re yet to see the effects on consumers. The telco has been simplifying mobile plans for about two years now, but growth in subscription has not seen significant boosts, except for in their MVNO holdings. Perhaps it is too early into the T22 strategy to tell, so time will determine just how much of a success Telstra’s recent moves will be.

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.