Telstra plans to split into three units under radical restructure
Telstra has revealed plans to split into three separate business units in a radical restructure that paves the way for the nation's biggest telecommunications company to spin off its infrastructure assets.
It's the biggest corporate change since the government started taking Telstra private in 1997, the company said.
Under the proposed restructure, announced on Thursday at the company's annual investor day, Telstra's infrastructure business InfraCo will be divided into two separate units - InfraCo Fixed, which will own and run Telstra's fixed line assets, and InfraCo Towers, which will own the mobile infrastructure. A third unit, ServeCo, will own the active parts of Telstra's mobile phone business, including the radio access network and spectrum assets.
It's the biggest corporate change since Telstra's privatisation, the company said.Credit:Craig Sillitoe
The move is the biggest shake-up of the company since it announced its T22 strategic overhaul in 2018, which saw Telstra cut over 6000 jobs and give its mobile and fixed plans a complete makeover.
InfraCo was established as part of the T22 strategy to provide investors a clear picture of the value locked in Telstra's infrastructure assets (tower, exchanges, pipes and ducts) and also give the company an opportunity to buy the National Broadband Network.
Telstra CEO Andrew Penn said on Thursday that InfraCo was now ready to take the next significant step as a business.
“With Telstra InfraCo now a fully operational stand-alone business unit and the NBN roll-out effectively complete, now is the time to take the next step in realising our T22 ambitions, including monetisation of our infrastructure assets where appropriate,” he said.
“The proposed restructure is one of the most significant in Telstra’s history and the largest corporate change since privatisation. It will unlock value in the company, improve the returns from the company’s assets and create further optionality for the future.”
The proposed restructure is scheduled to be completed by December 2021. The three business units will operate under the parent company Telstra Group.
Mr Penn said the company was "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.
“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.”
Telstra on Thursday also reconfirmed its profit forecasts for financial year 2021, with underlying earnings expected to land at between $6.5 billion and $7 billion, and said it was confident it can lift earnings to a range of $7.5 billion to $8.5 billion by fiscal 2023.
Hitting the 2023 earnings target is critical to Telstra maintaining its dividend of 16 cents per share.
”If we are successful in getting into the bottom end of the $7.5 billion to $8.5 billion underlying EBITDA [earnings before interest, tax, depreciation and amortisation] range by FY23, this would equate to an estimated ROIC [return on invested capital] of close to 8 per cent,” Mr Penn said.
“As a result, we have updated our ROIC target accordingly to be around 8 per cent" by fiscal 2023, he said.
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Technology and business journalist, with digital experience. Stints at Business Spectator, The Australian. Better than average cook, pretty handy with knives and guitar.