Telstra has added more colour to the business restructure it announced last year, including the fact that it plans to separate out its international operations into a new division.

Mary Lennighan

March 22, 2021

3 Min Read
Telstra adds international biz to restructure, talk of NBN buy resurfaces

Telstra has added more colour to the business restructure it announced last year, including the fact that it plans to separate out its international operations into a new division.

Meanwhile, chief executive Andy Penn addressed the ongoing question of Telstra’s relationship with NBN and persistent rumours that an acquisition could be on the cards. Simply put, this restructure is nothing to do with NBN, but he also gave no indication that an NBN buy is out of the question; quite the opposite in fact.

“Every time we tend to talk about the establishment of [Telstra] InfraCo, we get lots of newspaper articles about how we’re planning to buy the NBN,” Penn said on a call with analysts on Monday. “That’s not necessarily our endgame here.”

Interesting use of the word ‘necessarily’ there.

“It’s always been a case of creating optionality, creating transparency around the assets, and managing them more optimally,” Penn said. “And that optionality includes a range of different things such as the monetisation arrangements that we’re talking about.”

Australia’s Communications Minister Paul Fletcher formally declared the NBN build complete and the business fully operational late last year, a disclosure that is required ahead of any privatisation move. However, as the government pointed out in December, the announcement does not mean it will take the next steps towards privatisation and indeed, it had previously noted that it would not consider selling off NBN during the present parliamentary term, which is expected to run until mid-2022.

There are a number of prerequisite steps that would need to take place before the government could pursue a sell-off, each of which “would take significant time,” it said.

Penn made a similar comment on Monday. “I think that is many years away,” he said, of the NBN privatisation.

“I envisage that the NBN privatisation…is a good number of years down the track,” he said. “And I only say that, because we would be doing this [restructuring] in any event, regardless of whether that does or doesn’t occur,” he added.

“But were we to contemplate [a] business combination with NBN at a future point of time, it would probably require a more substantive de-linking of InfraCo Fixed from the rest of the Telstra Group, because we would need to…not be vertically integrated. And that may require further shareholder approval at a later point of time,” Penn said.

Telstra has been working on the separation of its infrastructure business for a couple of years. Last year it shared plans to set up two subsidiaries: InfraCo Fixed, to house its passive infrastructure on the fixed side, such as ducts, fibre, data centres and exchanges; and InfraCo Towers, for its mobile towers assets. A third unit, ServeCo, will cover products and services, customer service, and will include spectrum and active part of the network, such as the RAN.

InfraCo Towers is slated for monetisation, and according to Penn, Telstra is on track to bring in external investment in the second half of the year; it expects to receive binding offers from would-be investors by year-end.

On Monday Telstra expanded its restructuring plan by announcing the creation of a fourth business unit, Telstra International, that will include the existing Telstra Global business plus subsea cable assets. It also provided more details on the process, including the fact that it intends to create a new holding company for the Telstra Group and transfer the relevant assets to the new units via a scheme of arrangement that shareholders will have the chance to vote on at October’s AGM.

And shareholders will vote simply on the legal reorganisation of Telstra, and not on any future merger with NBN. It’s pretty clear that such a tie-up is a possibility, but not for some time.

About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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