Telstra stakeholders were hit with a bombshell announcement this morning when Telstra revealed another raft of sweeping changes, including cutting 8000 jobs over the next three years and spinning out its infrastructure into a separate business unit.
As part one of the four pillars of its 'Telstra2022' strategy, the telco shared more details with shareholders about how the new infrastructure business, Telstra InfraCo will operate.
Telstra made it clear that spinning out its infrastructure could pave the way for a possible demerger in the future, or "the entry of a strategic investor in a post-NBN rollout world”.
InfraCo will own an estimated $11 billion in assets comprised of Telstra's fixed networks infrastructure including data centres, non-mobiles related domestic fibre, copper, HFC, subsea cables, exchanges, poles, ducts and pipes. This includes Telstra's copper and HFC networks.
However, it does not include Telstra's mobile network assets such as spectrum, radio access equipment, towers and fibre backhaul, which Telstra will continue to own and operate. Telstra will also continue operating its Network Applications and Services business, which includes cloud services.
InfraCo will ultimately be responsible for key fixed network assets and for managing relationships with three main customer groups: wholesale, NBN Co and Telstra's consumer, small business and enterprise customers.
Telstra's Operations group will remain responsible for key operational activities like managing traffic on its fibre networks and all other network management functions.
InfraCo will begin trading on 1 July this year, and will report its first financial result during Telstra's half-year results for the 2019 financial year in February.
Telstra expects InfraCo will have 3000 staff in the next three years. It will also have its own chief executive who will report to Telstra chief Andy Penn. Telstra's group executive for wholesale Will Irving will lead the business during the transition period until a permanent CEO is appointed.
"By putting our fixed assets together in a single BU we are establishing the right structure to give greater focus on this part of Telstra’s business. It will also provide greater visibility to the market of the value of this business and create more optionality for the period after the nbn rollout is complete," Irving said.
Telstra estimates that InfraCo would have had annual revenue of $5.5 billion in the 2018 financial year if it was a separate entity. Irving said the primary source of its revenue comes from existing wholesale arrangements, as well as from commercial works for NBN Co, long-term recurring proceeds from the NBN network and internal access revenue from the rest of Telstra.
The business would have had $3 billion in revenue, two-thirds of which stems from long-term recurring revenue, and the rest from legacy assets.