Report Overview

‘Telstra 2022’ – the inevitable end game of Australia’s n ...

Telstra has been on the path to structural separation ever since Senator Conroy came up with his plan for the nbn back in 2009.
With its one-off nbn payments winding down, Telstra had no choice but to overhaul its business structure, structurally separate its assets & significantly reduce headcount.
But this strategy comes with major implementation risk and any mis-steps could quickly negate the expected benefits.
In the past decade, the rise of technology companies such as Apple, Google, Facebook and smaller OTT businesses in apps, content, advertising, the cloud and Internet of Things has led to the commoditisation of the Telco business. In addition, the entry of aggressive challengers and falling retail prices has translated into stalling growth and pressure on margins. In addition, the NBN has ensured that the margins for fixed broadband have fallen to the point where Telstra’s fixed broadband business is virtually marginalised – with the Telstra CEO indicating that “reseller margins were rapidly moving to zero”. So far, Telstra has mainly responded with cost-cutting measures, but we believe that just maintaining the status quo is a recipe for a slow death. In this report, we briefly analyse the impact of Telstra’s recent announcements on its strategy day in June 2018 and provide our views on the potential implications.