Telstra wields the axe as it kicks off enterprise 'reset'

Telstra has been reviewing Telstra Enterprise since February, as it grapples with various economic headwinds that have taken their toll on its corporate client base. Based on this review, it has identified three measures to take that are intended to cut costs, sharpen its focus on areas where it has the strongest differentiation, and further improve the level of customer service.

First and foremost, Telstra plans to streamline its network applications and services (NAS) portfolio, reducing the number of products on offer by nearly two thirds. It will also adopt a simplified customer sales and service model.

Finally, it will also cut costs at its digital transformation consultancy, Telstra Purple – particularly in the NAS products area – to bring it into closer alignment with revenue, and reflect changing market dynamics.

This, hopes Tesltra, marks the beginning of a reset for its enterprise division, which saw a 67% year-on-year decline in EBITDA during the first half of fiscal 2024, and a 3 percent fall in revenue, led primarily by the NAS business.

"Telstra's ongoing investment in infrastructure, technology, innovation and service for our customers drives growth and underpins Australia's digital economy, contributing to the prosperity of the nation," said Telstra CEO Vicki Brady. "This is occurring within a dynamic environment, with an evolving competitive landscape, rapid advances in technology, changing customer needs, and the ongoing inflationary pressures facing all businesses."

As well as overhauling enterprise, Telstra is also making changes to its internal operations, which includes dismantling its Global Business Services unit. It was established in 2019 under its previous strategic plan, Telstra 2022 (T22), in order to centralise its large scale back office functions as a means of reducing costs.

It clearly hasn't panned out the way Telstra hoped, because these functions will now be redistributed around the business, which the telco says will simplify processes and provide greater decision-making capabilities to those managers who are closest to customers.

As a result of all this upheaval, around 9 percent of Telstra's 31,000-strong workforce will be shown the door.

"I appreciate the uncertainty proposed changes like this can create for our people and we will support them through this change with care and transparency," said Brady. "Consultation on 377 roles will begin immediately, mainly from areas supporting the products and services to be exited in Telstra Enterprise."

Telstra reckons the overhaul will generate savings of A$350 million ($233.4 million) by the end of fiscal 2025, and is expected to result in one-off restructuring charges of A$200 million-A$250 million, spread across the remainder of this financial year and the next one.

Telstra also reiterated its full-year 2024 underlying EBITDA guidance of A$8.2 billion-$8.3 billion. In fiscal 2025, which kicks off in August, Telstra expects to generate underlying EBITDA of A$8.4 billion-A$8.7 billion.

Meanwhile, Telstra also revealed it will scrap its annual consumer price index (CPI)-linked price reviews from its postpaid mobile plans, bringing them into line with its other products.

"This approach reflects there are a range of factors that go into any pricing decision, and will provide greater flexibility to adjust prices at different times and across different plans based on their value propositions and customer needs," Brady said.