Creating industry leading cost and portfolio management
Posted on June 20, 2018
2 min read
In an intensely competitive world, Telstra needs to change to ensure that we can lead the market during a time of disruption.
A big part of this is ensuring Telstra has an industry-leading costs base and the best possible approach to asset management.
Two years ago we narrowed our strategy to ensure all new growth investments were more closely focused on products and services close to the core of our business.
Since then, that focus has meant we have decided to sell our investment in Autohome for $2.4 billion, to not pursue international consumer opportunities, to restructure our investments in Foxtel and to streamline our Telstra Health business and our digital media and online video platform, Ooyala.
We intend to be even more focused going forward, streamlining businesses and focusing on costs and productivity.
This will include pursuing the sale of assets to deliver up to $2 billion to strengthen the balance sheet by the end of FY20.
It also includes a further $1 billion increase in our productivity program to reduce the underlying fixed costs in our business by $2.5 billion by the end of FY22.
This means that after inflation and re-investment, our gross cost productivity target is expected to almost halve our underlying core fixed costs to approximately $4.5 billion by the end of FY22.
We’ve already made good progress on improving productivity. Strong momentum since we launched our productivity program has meant we’ve been able to deliver cumulative productivity of approximately $700 million since FY16.
Now we will take a range of measures to continue to improve our productivity. The best form of productivity improvements are the ones that deliver better outcomes and get it right first time for our customers. We will be simplifying our product set, phase out legacy products and migrate customers to new products. We will also further digitise sales and service channels and continue to improve our procurement practices.
The changes we are making will help take our underlying fixed costs from $7 billion in 2017 to $4.5 billion by 2022. This will give Telstra a globally-competitive cost base.
Our increased financial focus and discipline will protect our strong balance sheet and help the business deliver on the most important areas of work.