Massive Restructuring on the Way for Telstra

Massive Restructuring on the Way for Telstra

In the face of intense speculation that it plans to acquire the National Broadband Network over the next few years, Telstra has announced significant plans to break itself into three separate legal bodies.   The organization also seeks opportunities to break into the renewables industry to re-sell less expensive electricity to its consumers by using its renewables investments.

According to Telstra’s CEO Andrew Penn, this is the most significant and most complicated restructuring the company has been in since its privatization. He added that he intends to finalize the restructuring by the end of 2021. 

The plan would break Telstra into three legal bodies working under a Telstra Group umbrella. The legal entities include:  

  • InfraCo Fixed — which operates and manages the physical assets of the Telstra company, which is data centers, cables, fiber, and exchanges.  
  • InfraCo Towers — which will operate Telstra’s mobile towers. 
  • ServeCo — the retail subsidiary of Telstra.

Penn said restructuring the company would allow it to unlock more value from its infrastructure by better utilizing its tower assets for commercial purposes. Penn said restructuring the company would allow it to unlock more value from its infrastructure by better utilizing its tower assets for commercial purposes.

He added that Telstra plans to look for funding from third parties while retaining control of its strategic towers and its competitive differentiation in its mobile business section. He anticipates that the process shall begin next year and follow a similar schedule for the rest of the restructuring plans.  A variety of commercial, regulatory, and operational criteria, coupled with talks with employees and unions, are still needed to complete the structure. Telstra shares rose by 3% after Penn made the announcement. He also hinted at plans by the company to move into the renewable energy industry during the event. 

CEO Penn said that although the company is looking into opportunities to re-sell energy to its customers, the plans are still in their initial stages. Over the next few weeks, he remarked that the company would be applying for the appropriate licenses and making everyone aware. 

Telstra’s dramatic restructuring plans have ignited talk that they are poised to buy NBN Co in the coming years. Splitting the company into three will allow InfraCo to bid for the company, should it be privatized in the future. However, Mr. Penn stated that the restructuring could position InfraCo to bid for NBN Co, though it might not happen soon. 

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