Telstra just explained how it will spend $3 billion to future-proof itself

People walk past a Telstra logo in Sydney on February 12, 2015. (WILLIAM WEST/AFP/Getty Images)

There was a strong “back to basics” theme at Telstra’s Investor Day presentation today.

The spotlight was on the $3 billion of capital expenditure that would help Telstra improve and grow its “core” areas.

“The refinements in our strategy make it clear that our future investments are going to be focused on areas where we have core strengths and skills which are close to our core business,” Telstra chief executive Andrew Penn said.

The $3 billion pool will be divided into $1.5 billion for building future-proof networks, $1 billion in digitising the telco’s own business and $500 million in customer experience enhancements.

The network improvements will include converting to a fully software-defined (SDN and NFV) system by the end of financial year 2020; doubling the speed of 4G for 87% of the population by the end of 2019; and delivering peak mobile speeds of up to 1Gbps in capital city CBD sites by the end of 2019.

Penn said the improvements were necessary as customers “became more digital”.

“We are faced with unprecedented demand on our network and a world of opportunity to deliver new experiences. Network traffic over our fixed and mobile networks will grow five times over the next five years and the capacity to support this level of traffic growth is not yet built,” he said.

The digitisation push, led by former Microsoft executive Stephen Elop, will see Telstra develop more channels for customers to interact digitally. One aim is to up the level of customer service transactions executed by digital means to 70% by the end of 2020.

Penn said the network and digitisation initiatives would have a flow-on effect onto the customer experience improvements, saying the telco wanted to remove “key pain points” for customers.

As well as directly addressing sales and service practices, the changes will see new Telstra products have “simplicity and usability” as a priority at “every step of the product experience”.

Australia’s biggest telco has had a tough year in the eyes of the public, with at least five high-profile outages striking blows to its “premium price for premium service” reputation.

Human error was blamed for knocking out mobile voice and data networks in February, then a second national mobile service outage hit Telstra’s 4G, 3G and 2G networks on 17 March — with Telstra offering ‘free data’ days as compensation for each incident.

The third outage saw mainly Victorian and Tasmanian customers suffer on 22 March.

The fourth major incident saw 75,000 NBN and ADSL customers services go down on 11 June, while the same month also had the fifth outage had business customers such as Jetstar, ME Bank and Sensis unable to operate normally.

The incidents had many, including consumer advocacy group Choice, questioning the wisdom of paying the “Telstra tax” as the company was evidently not returning value in return — a claim that the telco denied at the time.

Penn said today that the $250 million remediation program to prevent future outages is well under way.

“Most of the key underlying initiatives have now been implemented and recovery times, particularly in mobiles have been significantly reduced,” he said.

“Following the series of network interruptions we experienced in the first half of the calendar year, we have seen a strong network performance in the second half. This is against the background of data volumes which continue to increase driven by strong demand for media and streaming services.”

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