In a significant move, Telstra, Australia’s leading telecommunications company, has announced plans to drastically cut spending on IT operations and reduce the number of legacy IT and networks in its environment. The decision is part of Telstra’s ambitious T25 transformation strategy, aimed at meeting a cost-out target.
The announcement came during Telstra’s half-year results presentation, where a transformation progress scorecard revealed an amber status for its cost discipline goals. The amber status indicates progress, albeit below the target set by the company.
Telstra’s CEO, Vick Brady, reassured stakeholders that despite the cost pressure challenges, the company expects to achieve the majority of its cost-out ambition by the end of FY25
“I want to reinforce that while we’re being challenged by cost pressure, we still expect to achieve the large majority of our cost-out ambition by the end of FY25 … with most of this in FY25,”
To meet its original target, Telstra will need to take more significant action than previously expected due to the level of higher ongoing cost pressure in the business.
The productivity initiatives include significantly reducing IT operations spend, decommissioning legacy IT and networks, transforming the NAS (network and applications services business) cost base, and improving process efficiency across customer and corporate back-office functions.
Brady also highlighted the use of AI to provide a better customer experience and further cost optimisation. The company’s enterprise business, NAS, underperformed in the half-year as its enterprise customers held back on professional services spend.
Meanwhile Telstra has been implementing recommendations stemming from a review of its enterprise business initiated in late 2023, which includes measures to streamline its cost base.
According to Brady, the company faced challenges in adjusting its cost structure to align with the rapid changes in trajectory, originally designed for more expansive growth.
However, Telstra is now taking immediate steps to realign the business for future success. Brady expressed optimism regarding the medium-term outlook for NAS (Networks Applications and Services).
In financial terms, Telstra reported an 11.5 percent increase in net profit after tax for the first half of FY24, totaling $1 billion compared to the corresponding period in the previous year. Additionally, total income saw a modest uptick of 1.2 percent, reaching $11.7 billion.
