Telstra plans to split into three subsidiaries

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Telstra plans to split into three subsidiaries

Biggest change since privatisation.

Telstra wants to go through a corporate restructure that could see it split its operations among three subsidiaries and sell some parts, though it said “no final decisions have been made”.

CEO Andrew Penn called the restructure Telstra’s “biggest since privatisation” and said it would involve extensive consultation with staff, regulators, unions and other interested parties.

“Today, we are announcing an important milestone in our T22 strategy,” Penn told the telco’s investor day.

“In fact, an important moment in Telstra's long history: a proposed restructure of our business into three separate entities under a parent company Telstra Group.”

Penn said the three entities would be called InfraCo - Fixed, InfraCo - Towers and ‘ServeCo’, although he noted ServeCo was a placeholder name rather than an actual brand.

“ServeCo is not a new brand name, I should say,” he said.

“We're just using that as a reference today for the purpose of differentiating this entity, which is focused on products and services and customer support from the infrastructure business.”

Telstra has already split off its infrastructure assets into a standalone business unit called InfraCo back in 2018.

It now intends to further divide InfraCo into two parts: fixed and mobile.

“InfraCo - Fixed will own and operate our passive physical infrastructure assets - the ducts, the pipes, fibre, data centres, subsea cables and exchanges, all of which underpin our fixed telecommunications network,” Penn said.

“Infraco - Towers will own and operate our passive, physical mobile tower assets, which we will look to monetise over time, given the demand and compelling valuations for this type of high quality infrastructure.”

ServeCo, meanwhile, would house all parts of Telstra that helped it deliver services and contributed to its competitive advantage.

“ServeCo will focus on how we create products and services, support customers and deliver the best possible customer experience, including maintaining our significant network leadership,” Penn said.

“ServeCo will own the active parts of our network, things like software defined networking, that allows us to operate our network in a very dynamic way.

“It's important to understand that we are being very careful to retain key elements of our network in ServeCo. 

“These include things like the radio access network equipment on our mobile towers, our spectrum holdings, and the electronics that light up the fibre in our fixed network because all of these underpin our strategic advantage and differentiation.”

Penn noted that any restructure “is a complex process” and would need to be consulted on extensively.

“This is undoubtedly our biggest and most complex since privatisation,” he said.

“It will take time to work through the many commercial regulatory and operational issues and we are very conscious of the many stakeholders who will have an interest in these changes. 

“That is why we have announced our intentions today, because we wanted to do so ahead of implementation so we can undertake a comprehensive consultation program to detail the many benefits of restructured delivery to our stakeholders, but also hear their input as well.”

If it goes ahead, Telstra wants to complete the restructure by the end of calendar year 2021.

It said it plans to provide an update - presumably incorporating some results of its consultations - in February 2021.

More to come

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