Telstra is ringing in a new operations era

The communications giant has laid out its plan to adjust to a more competitive digital environment while also easing exposure to its traditional platform-centric business.

For the past several decades Telstra has been in a continual process of restructuring and transformation as the combination of liberalisation of its markets, regulation and technology shifts have challenged it. It’s about to undergo another major restructuring of its core in response to those same factors, as well as in response to some opportunities.

Telstra’s chief operations officer, Brendon Riley, today outlined a new model for his part of the business – responsible for about half Telstra’s domestic workforce – which reflects the pressures and rapidly shifting shape of Telstra’s portfolio of businesses.

The changes will almost inevitably mean cost reductions and job losses but aren’t necessarily or primarily about costs.

Rather they reflect the ongoing demise of the old copper core of Telstra, the emergence of the national broadband network (in whatever form) and the structural shift in emphasis within the telecommunications sector from hardware to software; from enterprise IT to the cloud.

Telstra Operations is responsible for every aspect of the group’s networks – design and engineering, construction, operation and delivery of customer services. Riley is also responsible for Telstra’s NBN-related infrastructure and its network application services in Australia and offshore. It is a very big chunk of the current Telstra, albeit much of it dedicated to the group’s legacy networks.

What Riley unveiled to his staff today is a new model which, from July 1, will create two sets of five groups which will have responsibility and accountability for end-to-end delivery of services to customers, which reflects the increasing emphasis and effort Telstra is placing and making to improve its customer service levels within an environment that will become ever more competitive as the NBN rolls out.

One set of five (IT solutions, networks, customer service delivery, NBN and network applications services) will effectively be verticals, with the other five (service operations, asset and facilities management, labour and contract management, product delivery management and business performance management) working across Telstra to produce more consistent delivery and prioritisation of its resources.

The underlying theme of the restructure is clear. Today Telstra has a lot of resources dedicated to its fixed networks, which are in a long-term decline that will accelerate as the NBN rolls out and as consumers divert ever more of their communications activity to wireless networks.

As Riley said to his staff, Telstra’s traditional businesses are under increasing margin pressure and the largest proportion of Telstra’s budget is spent supporting them, which is not a sustainable business model.

It needs to wind down the capital and staffing tied to those networks as their significance and profitability diminishes, redeploying them in newer growth areas like its own NBN-related activities and its fast-growing network applications services businesses here and offshore.

As it transitions from a platform-centric business towards more of a software and services future it will obviously require different skills and capabilities, so the nature of Telstra’s workforce and its size will probably continue to evolve over time, as it has over the past several decades.

The latest restructuring would suggest, however, that another acceleration of that process is about to get underway.

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