Telstra's profit drops in first half

16,000 employees trained in Agile as part of transformation program, CEO says

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Brodie Miller (CC0)

Telstra’s first-half profit dropped 7.6 per cent to $1.14 billion, the telco reported today, with total income declining 2.8 per cent to $13.4 billion.

“Our results for the half were consistent with our full year guidance,” chief executive Andy Penn said in remarks prepared for a briefing on the company’s results for the six months to 31 December.

“While they reflect the headwinds we continue to face in the migration to the NBN, they also show we are starting to build positive underlying financial momentum as a result of our T22 strategy.”

The company’s earnings before interest, taxes, depreciation and amortisation (ignoring one-off payments from NBN Co and restructuring costs) dropped 6.6 per cent to $3.9 billion, although Telstra noted that excluding the “NBN headwind” EBITDA had grown for the first time since FY16, increasing by $90 million. (Telstra expects the NBN to have an ongoing impact on its earnings in the region of $3 billion.)

The T22 strategy, first detailed by Penn in 2018, has seen the company cut its headcount, attack costs and streamline its product offerings, as well as establish a new InfraCo business unit that holds its fixed-line assets and provides “optionality” if the government privatises the NBN.

“We have continued to focus on removing hierarchies and siloes and redesigning our organisation from the ground up,” Penn said.

“As at 31 December, we had announced 6900 of the net 8000 direct workforce role reductions of which 6300 had left the company and we have also reduced our indirect headcount by approximately 8,000 in the last 18 months.

“At the same time we continue to build new capabilities for the future creating 1500 new roles in new areas including cyber security, software engineering, data analytics and AI.”

The CEO said that 1300 of those new roles have already been appointed.

The company cut its underlying fixed costs by $422 million, or 12.1 per cent, during the half. The telco aims to reduce costs by a total of $2.5 billion by the end of FY22, and has so far achieved $1.6 billion in savings.

Telstra last year began a largescale transition to Agile teams.

“We have now introduced Agile at scale to the business and trained over 16,000 employees; however, in the second quarter we were slightly below our maturity target and consequently we have identified this metric as amber,” Penn said today.

Telstra’s 5G rollout has reached 32 cities and by the end of the financial year will be available in 35 cities and major towns, the CEO said. More than 100,000 5G-capable devices are on Telstra’s network.

Copyright © 2020 IDG Communications, Inc.

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