Telstra has a new strategy following painful network outages

Benedicte Bemet strikes a pose during the Telstra Ballet Dancer Awardin Sydney. Don Arnold/WireImage

Telstra has a new strategy, including plans to cut $1 billion in costs, and has revealed how it will spend an extra $3 billion to future proof its network following embarrassing outages this year.

CEO Andrew Penn says he has refined the telco’s strategy to reflect continued focus on improving the experience to customers and growing the core business.

“The changes to our strategy are not major, however they are an important signal to shareholders, employees and our customers that we will be relentless in delivering customer experience improvements and disciplined in how we invest in our networks, services and growth businesses,” he says.

“It will also enable us to respond strongly to increasing competitive intensity, the accelerating rollout of the nbn and the greater demand for data in an ever increasingly connected world.”

The strategic pillars of Australia’s biggest telco are now:

  • Deliver brilliant customer experiences
  • Drive value and growth from the core
  • Build growth in businesses close to the core

Penn says the strategy refinements are supported by Telstra’s $3 billion investment program announced in August following a five outages in three months including the mobile phone network and broadband.

The $3 billion program will include more than $1.5 billion in building networks for the future, $1 billion in accelerating the digitisation of the business and up to $500 million in other customer experience related improvements.

Penn says the target return for the $3 billion of additional investment would be to deliver run rate EBITDA benefits of more than $500 million a year by the financial year 2021.

Of the $500 million benefit, two thirds will be from additional revenue and one third from cost improvements.

“In conjunction with our ongoing productivity program, we expect to reduce net underlying core fixed costs by over $1 billion by FY21,” Penn says.

At an investor day presentation, Telstra also reconfirmed its 2017 financial guidance.