INSIGHTS

Telstra is Australia’s largest telecommunications company and it has an international footprint to connect with the world. The company provides a wide range of connectivity solutions to wholesale, commercial and retail customers, and has the most recognised brand in its markets. Following a decade of disruption caused by development of the National Broadband Network (NBN), Telstra has transformed into a business that’s well positioned for the future.

Telecommunications services are an essential part of any economy and the strategic importance of critical infrastructure is becoming increasingly recognised. Telstra provides a wide range of solutions to its customers through products related to mobile services, fixed solutions, infrastructure, towers and new initiatives.

Telstra generated strong earnings and cash flows when it had monopoly ownership of Australia’s fixed copper lines for voice and internet. This all changed with development of the NBN, which over a decade has seen its legacy copper infrastructure replaced with a new fibre broadband network owned by the Australian Government. 

Although Telstra received A$11 billion of compensation from the NBN rollout, the lost business negatively impacted its earnings and prompted a significant business transformation. Andrew Penn (former CEO) led the turnaround strategy, which has resulted in products and customer interactions being simplified, significant cost savings and the structural separation of its infrastructure and services operations.

Telstra has successfully delivered what it promised, achieving 80% of its turnaround targets to date with more work still in progress. Following this period of major disruption, it is a much different company today.

Improvements to the customer experience were an important focus of Telstra’s business transformation. Contract terms and termination fees were unpopular with customers and have therefore been removed. The company has also streamlined the number of different options available to its customers, making administration more efficient and price changes much easier to implement.

Telstra’s dominant market position affords strong pricing power. In mobile (the largest business segment), the company is a price leader and its products are sold at a premium to those of its competitors. Annual price reviews have also been introduced whereby pricing increases with CPI inflation. Linking mobile pricing to inflation gives Telstra another defensive quality that’s invaluable in the current environment. 

Telstra Plus is a loyalty scheme launched by the company in May 2019. A target of six million members was set for 2025 but the membership base has almost reached five million already. This loyalty programme helps to mitigate competitive pressures and reduce customer losses.

Now operating in 23 major cities, Telstra has 200 of the world’s top companies on its network. Its coverage reaches two-thirds of the globe. The company is also a core part of the Australian economy and is considered the most valuable brand in the country after Woolworths. Telstra’s scale and brand perception are key advantages that support its reach, product offering, customer service and financial performance. 

Australia has a strategy to be one of the world’s leading digital economies by 2030. Telstra is an integral part of this journey and is poised to grow with Australia and the digital revolution. The company is seeking more opportunities to monetise its network assets and services as these trends gather momentum. It has ambitions to be a one-stop shop and the natural communications and technology partner for consumers and businesses.