Telstra announces changes to retail store network

Thursday 11 February – Telstra today announced its intention to transition to full Telstra
ownership for its bricks and mortar branded retail stores across Australia.
Telstra has 67 Telstra owned and operated stores, with another 166 branded stores run by
independent licensees and a further 104 stores operated by Vita Group Limited.
The proposal was included in Telstra’s FY21 Half Year results announced today at which CEO
Andy Penn provided an update on the company’s T22 strategy.
Group Executive for Consumer and Small Business Michael Ackland said the move was
required to keep pace with the growing digital economy and give Telstra more flexibility to
respond to customer needs.
“This was not an easy decision given that we have enjoyed a long-term partnership with many
of our licensees,” Mr Ackland said.
“As more customers interact with businesses online resulting in changes to the broader retail
industry, we think now is the right time to bring back full ownership to further develop a
consistent and integrated customer experience across our online channels and store network.
“At the height of the COVID-19 pandemic we were able to redeploy frontline staff from Telstraowned stores to assist customers through our digital channels or via the phone.
“It’s this flexibility in how we serve our customers that we’ll be able to unlock with more retail
branded stores under Telstra ownership.”
Mr Ackland said the move was also designed to further embed responsible business practices
through direct employment relationships with store staff, and to have more customer service
issues resolved in store.
“Ultimately, we want locals to be getting what they need by visiting their nearest store or
speaking with a familiar voice over the phone,” he said.
“We also want our store employees to continue to maintain the high standard of service that as
a company we expect of them through our responsible business approach.”
Negotiations with independent licensees about an agreed transition to Telstra ownership will
begin shortly and that process, which includes plans to offer roles to current store staff in the
majority of cases as part of agreed transitions, is expected to continue over the next 12 to 18
months.
For Vita Group, conversations will begin today about next steps.
Telstra expects to maintain a large retail presence across Australia while also expanding the
availability to purchase and access services via its digital channels.
“We know that in many regional and rural towns, the local Telstra store is a valued part of the
community providing support to a range of businesses and residents,” Mr Ackland said.
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“Our regional and rural stores will continue to do this under Telstra ownership as well as
providing an excellent level of service to local customers.”
Telstra Business Technology Centres or T-Partner operators are not affected by this change

courtesy of Bell Direct
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DYOR

i hold TLS ( but am looking for a graceful exit )

Telstra builds momentum through 1H21 financial results

• Reported Total Income1 of $12B, EBITDA of $4.1B and NPAT of $1.1B
• First half Underlying EBITDA of $3.3 billion with second half guidance of $3.3 - 3.6
billion, with ambition2 for mid-to-high single digit percentage growth in FY22
• Interim dividend of 8 cents per share and expected FY21 total dividend of 16 cents
per share3
• Strong mobile performance, +80,000 retail postpaid handheld services, TMMC +$3
• T22 cost reduction target increased to $2.7 billion by FY22
• Revised FY21 guidance4 for Total Income, Underlying EBITDA and Free Cashflow
Thursday 11 February – Telstra today released its results for the first half of financial year
2021, showing the business building momentum towards growth in its underlying business.
The Board resolved to pay a fully-franked interim dividend of 8 cents per share, returning
approximately $950 million to Telstra’s shareholders. The Board also said it expected to pay a
fully-franked final dividend of 8 cents per share, bringing the total dividend for FY21 to 16 cents
per share3
.
CEO Andrew Penn said the results showed Telstra’s financial performance was at a turning
point ahead of an anticipated return to growth in underlying EBITDA.
“After a decade of disruption following the creation of the nbn, and with its rollout now declared
complete, we can clearly see the path to underlying growth ahead of us,” Mr Penn said.
“We responded strongly to the financial headwinds created by the nbn through our T22 strategy.
This strategy is transforming Telstra while balancing the needs of our customers, our employees
and our shareholders. We are now less than 18 months from completing T22. We have
achieved an extraordinary amount and Telstra today is a leaner, more responsive, and more
agile company than it has ever been.
“Our investment in innovation and technology, digitisation and networks, improving our customer
experience and being disciplined in our capital management, mean that at the start of this
decade, as Australia digitises its economy, Telstra is in a strong position to grow.
“To ensure our future success, we must recognise this moment for what it is – the time to be
bold and seize the opportunities we have been patiently building towards. There is a lot of work
ahead of us, but I remain confident we can achieve our financial ambitions including for
underlying EBITDA of between $7.5 and $8.5 billion and ROIC of around 8 per cent by FY23,”
he said.
On a reported basis Total Income for the half decreased 10.4 per cent versus the prior
corresponding period to $12.0 billion, while NPAT decreased 2.2 per cent to $1.1 billion.
Reported EBITDA decreased 14.7 per cent to $4.1 billion. After adjusting for lease accounting
on a like-for-like basis5
, EBITDA decreased 11.7 per cent to $4.0 billion.
Underlying EBITDA decreased 14.2 per cent to $3.3 billion. The largest two contributors to this
decline were the estimated impact from the in-year nbn headwind6 of $370 million and
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estimated $170 million impact from COVID-19. Excluding both these, underlying EBITDA was
broadly flat compared to the first half of FY20.
Mobile strategy continuing to deliver growth
Telstra’s strategy continued to deliver increased customer numbers in mobile. During the half,
Telstra added more than 80,000 postpaid handheld mobile services with healthy performance
across all segments and brands. It also added more than 46,000 unique prepaid handheld
users, and more than 163,000 Wholesale mobile services across prepaid, postpaid and IoT
services.
Mobile revenue declined due to lower hardware sales and the impact on international roaming
from COVID-19.
Postpaid handheld TMMC, a leading indicator of ARPU, increased by approximately $3 during
the half, building momentum towards ARPU returning to growth in the second half of FY21
compared to the prior corresponding period.
Reported postpaid handheld ARPU declined 8.6 per cent for the half, or approximately 3 per
cent if the impacts to international roaming are removed. This decline was all due to noneconomic accounting impacts, out-of-bundle declines and Belong dilution, with impacts from
recent pricing changes now positive. This gave Telstra strong confidence in the outlook for
mobile ARPU, as it expected pricing impacts to continue to strengthen in 2H21.
“The financial performance of our mobile business has reached an exciting turning point with
EBITDA growing sequentially in 1H21. Our investment in world-leading 5G means we are able
to offer our customers a combination of speed, capacity and coverage that is far superior to our
competitors. We remain confident that mobile EBITDA will continue growing sequentially in
2H21 and return to full-year growth this financial year,” Mr Penn said.
Telstra continued to extend its 5G leadership, with its network expanding to cover more than 50
per cent of the Australian population and delivering coverage to more than 100 cities and towns
across the country. One million 5G mobile devices are now connected to Telstra’s network. The
company also achieved a world-first with a download speed of greater than 5Gbps on a
commercial network using mmWave spectrum.
In Fixed – Consumer & Small Business, Telstra focussed on improving long-term economics
and customer experience. Bundles and data revenue declined 0.6 per cent with ARPU
stabilising as customers were moved to in-market plans. Telstra said it would focus on
increasing ARPU through differentiation, add-ons and improved plan mix including a higher
proportion of customers on 100Mbps+ plans.
In Fixed – Enterprise, revenue declined 6.4 per cent as Telstra transitioned from providing
virtual private corporate networks to integrating over-the-Internet technologies such as SDWAN
with Telstra Fibre and NBN access. NAS income declined 6 per cent.
Fixed - Wholesale results also showed continued declines in legacy products including from nbn
headwinds, and commercial works declines. The ongoing portfolio including passive
infrastructure grew.
Following through on T22
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Mr Penn said progress against the T22 strategy remained on track but Telstra remained
focussed on the work still to be done.
“More than 80 per cent of milestones are now delivered or on track to be delivered. Our
discipline in delivering T22 has brought enormous change for Telstra which is supporting the
turnaround of the company. Having said that, the hardest part of any transformation is often
seeing it through to the end and we have more to do in customer experience in particular,” Mr
Penn said.
“I am confident the many initiatives we have taken under our T22 program, particularly in
simplifying the business and the digitisation program, will further improve customer experience.
But I know not all aspects of our customer experience are where we need them to be and we
have more work to do. One of our focus areas for 2021 is the culmination of the digitisation
program rolling out in mass market.
“To get the real benefits from all the effort we’ve already made, Telstra needs to be bold. I’ve set
an aspiration7 for mid to high single-digit growth in underlying EBITDA in FY22 and $7.5 to $8.5
billion of underlying EBITDA in FY23. I am confident we can deliver this if we remain focused.”
During the half, Consumer & Small Business digital sales increased to account for 40 per cent of
Telstra’s transactions, while more than 70 per cent of service interactions were also handled
digitally. Telstra Enterprise reduced the number of active products by 45 per cent compared to
FY18 and launched Adaptive Mobility to give customers more flexibility.
Telstra continued to make progress on its productivity target, reducing underlying fixed costs by
a further $201 million, or 7 per cent, during the half and increased its productivity targets to $450
million in FY21 and from $2.5 billion to $2.7 billion by the end of FY22. Around $2.0 billion has
already been delivered under the program.
Telstra exceeded its target of monetising up to $2 billion worth of assets to strengthen its
balance sheet, with transactions including the sale of Velocity and South Brisbane Exchange
FTTP networks, and the sale-and-lease back of the Pitt Street Exchange property.
Telstra also amended one of the principles within its capital management framework, with the
principle regarding targeted capex to sales ratios updated from “Target capex/sales ratio of
~14% excluding spectrum from FY20” to “Target capex/sales ratio of ~12% excluding spectrum
from FY23.”
Progress on legal restructure
Telstra today also provided an update on the establishment and proposed monetisation of
InfraCo Towers, as well as the broader legal restructuring of the organisation announced in
November 2020.
Mr Penn said Telstra had significantly progressed the establishment of InfraCo Towers as a
separate operating business, with significant work due to be completed by the end of FY21 as
previously indicated.
“We plan to commence the process for external strategic investment into InfraCo Towers early
in the first quarter of FY22, with binding offers to be submitted by the second quarter of FY22.
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“We are undertaking significant verification and due diligence on our towers and property,
appointed key members of the management team and advisors, and preparation work is well
advanced to meet our timetable.
“Significant progress has also been made towards finalising the inter-company agreements
between ServeCo and InfraCo Towers, the redesign of processes, and implementation of new
tower asset management systems,” Mr Penn said.
Mr Penn said the proposed legal restructure of the Telstra group of companies into three
separate entities – InfraCo Fixed, InfraCo Towers and ServeCo – to drive greater transparency,
increase focus across our operating businesses, create a platform for growth and innovation,
and enable long-term valuation realisation from our infrastructure businesses, was well
underway.
“Since we updated the market in November 2020, we have appointed external advisors and
progressed consultations with stakeholders to obtain approvals and support for the restructure.
“This includes discussions with the ACCC, the ACMA and relevant Government Departments to
ensure that Telstra’s regulatory obligations will continue to apply as intended. We have also had
constructive engagement with NBN Co on the restructure.
“We will continue to work very closely with our partners, our people and stakeholders throughout
this process as we navigate the range of existing commercial, regulatory, and operational
requirements,” Mr Penn said.
The Group restructure is expected to be completed by the end of calendar year 2021, subject to
any requisite approvals, and a further progress update will be provided in March 2021.
Updating Telstra’s retail approach
Telstra today also announced its intention to transition to full ownership for all of its branded
retail stores across Australia. The move will enable Telstra to keep pace with the growing digital
economy and to provide greater flexibility to respond consistently to customer needs.
Currently, Telstra has more than 60 Telstra-owned and operated stores, with another 166
branded stores run by individual licensees and a further 104 stores operated by Vita Group
Limited.
Vita Group and individual licensees are being notified of the plan with discussions and transition
arrangements expected to progress over the coming months.
The year ahead
Telstra has also today issued revised financial guidance for several aspects of FY21 that were
first announced at Telstra’s FY20 results briefing on 13 August 2020.
The range for Total Income was adjusted from $23.2 billion - $25.1 billion to $22.6 billion - $23.2
billion, a $1.2 billion reduction at the mid-point from prior guidance. The large majority of the
change was due to low-margin hardware and other equipment sales.
Telstra also provided guidance for second half Underlying EBITDA in the range of $3.3 billion -
$3.6 billion, compared to $3.3 billion in the first half. Flowing this to the full year means the range
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for Underlying EBITDA was narrowed from $6.5 billion to $7 billion to be $6.6 billion to $6.9
billion.
The Underlying EBITDA guidance assumes an in-year nbn headwind of approximately $700
million.
The estimated COVID-19 impact in FY21 was unchanged at approximately $400 million.
The guidance range for Free cashflow after operating lease payments8 was increased from $2.8
billion - $3.3 billion to $3.3 billion - $3.7 billion, up $450 million at the mid-point, due to working
capital management and the impact of lower hardware revenue.
Telstra expects to be at the low-end of the net nbn one-offs range due to factors including NBN
Co’s decision to pause HFC-based connections of new customers.
Guidance for Capex remains unchanged from the disclosures made at Telstra’s FY20 results
briefing on 13 August 2020.
-ends

courtesy of Bell Direct
===================================================================================================

DYOR

i hold TLS ( but am looking for a graceful exit )