Summary
- Telstra Corporation has made significant progress towards T22 strategy with the proposed restructuring of its business into three legal entities.
- The restructuring would help the telecommunications layer to seize the possible monetisation prospects for its infrastructure assets and generate additional value for its shareholders.
- The restructuring is expected to complete by December 2021.
On 12 November 2020, Australian telecommunication company, Telstra Corporation Limited (ASX:TLS) announced a significant step towards its T22 strategy with the proposed restructuring of its business into three separate legal entities.
This restructuring, which is a crucial step towards its T22 strategy, would help the Company seize probable monetisation prospects for its infrastructure assets and hence create additional value for its shareholders.
The planned restructuring is the largest corporate transformation since its privatisation in 1997, making it a significant episode in the Company’s history. The move would improve the returns from the Company’s assets and create additional opportunities in the upcoming period.
In the last six to twelve months, the challenges and disruptions experienced by the Company have strengthened the increasing value of infrastructure assets on a global scale.
The Company expects to complete the proposed restructuring within the Telstra Group by December 2021.
A Glance at the proposed legal structure
InfraCo Fixed:
InfraCo Fixed would own and operate passive or physical infrastructure assets of Telstra. These assets consist of ducts, fibre, data centres, subsea cables and exchanges that strengthen the fixed telecommunication network.
InfraCo Towers:
InfraCo Towers would own and operate passive or physical mobile tower assets. Telstra is aiming to monetise over time depending on robust demand plus powerful valuations for this type of superior infrastructure.
ServeCo:
ServeCo would focus on creating innovative products and services. It would also support customers and provide them with the best possible customer experience. This division would own the active parts of the network plus the radio access network and spectrum assets to make sure that the Company continues to maintain its industry-leading mobile coverage as well as network dominance.
Update on Telstra’s Core Business
On 12 November, Telstra confirmed its FY2021 guidance updated in its FY2020 results. With the nbn rollout and being halfway through T22 strategy, Telstra expects its underlying EBITDA to start growing by FY22 and expects it to be in the A$7.5 billion - A$8.5 billion range by FY2023.
- Telstra’s mobile business continues to perform strongly as compared to its competitors. The lead towards 5G would help capitalise on a new multi-year cycle of growth.
- The Company has over 400K 5G devices on its network. TLS now expects the number to reach near 750K by the closure of 2020.
- The impact of nbn on fixed business continues as per the Company’s expectation and would potentially complete by FY2022.
- In FY2023, TLS plans to improve its Fixed EBITDA. It is targeting a mid-teens nbn reseller margin, managing the economic impact of the legacy copper network plus would focus on accelerating the use of fixed wireless in the home.
- The telecom player anticipates that after integrating mobile, Data & IP, NAS and International, and contiguousness like Health, the entire Enterprise business would return to growth.
- TLS is on track to provide A$2.5 billion in net productivity by FY2022.
Stock Information: TLS share price stood at A$3.120, up 4.347% at 01:35 PM AEDT.
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