Shares of Telstra Corporation Ltd [ASX:TLS] have fallen in value by over 5% since opening, following the announcement of their recent Telstra2022 strategy.
Telstra shares are currently trading at $2.75, down 16 cents from yesterday’s closing price of $2.91.
Why has Telstra’s share price dropped?
The fallen share price came shortly after an announcement this morning which revealed their plans to revamp the company in order to continue leading the market as they head towards 2022.
The announcement highlighted four key areas of change for the telco giant:
- Simplify product offering and eliminate customer pain points
- Establish a standalone infrastructure business
- Simplify their corporate structure
- Cost reduction program
They intend to do so with a new digital platform, which will help to improve their customer service with a move to create ‘effortless digital service’, along with the leading 5G network.
The new direction for the company will dramatically simplify their processes and the customer experience. For instance by 30 June 2019, Telstra will only be offering 20 core plans, in comparison to the 1800+ on offer today.
In addition, as a part of what Telstra has described as an industry leading approach, there will be ‘no more complex bills’ and no more ‘charges for excess data’.
Telstra will be introducing a new company called Telstra InfraCo, which will own all of the core network assets, including HFC network, Fibre network, Copper network, Subsea cables, Datacentres, Access equipment, as well as ducts and pipes.
The reason behind establishing Telstra InfraCo as its own business unit, is to maximise the value of their world-class fixed network assets, and allow them to list it on the stock exchange as a separate company to Telstra. This will be implemented by June 2019.
What’s next for Telstra?
A consequence of moving to a digital platform and a more automated process is the reduction of staff. Telstra are expecting this to be approximately 8,000 employees, including removing one in four executive and middle management roles. As you would expect, Telstra is receiving quite a bit of backlash in regards to this.
Telstra CEO, Andrew Penn, said:
‘We are creating a new Telstra that is able to continue to lead the market. In the future our workforce will be a smaller, knowledge-based one with a structure and way of working that is agile enough to deal with rapid change. This means that some roles will no longer be required, some will change and there will also be new ones created.’
The telco giant’s radical changes come with a lot of scrutiny, although it does seem that they are on the right track to simplifying their processes and pleasing customers.
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