Telstra CEO flags core IT architecture overhaul, network investment

Capex to sales ratio to be highest since 3G rollout under $3 billion investment program

Telstra CEO Andrew Penn

Telstra CEO Andrew Penn

Telstra CEO Andrew Penn has announced the telco will ramp up its capital expenditure, committing to spending $3 billion over the next three years on its networks and digitisation.

Telstra said the investment will boost its capex to sales ratio to the highest it has been since 2008-09 when it was rolling out its 3G network.

The telco today announced that net profit after tax for the full year increased 35.9 per cent to $5.8 billion, including $1.8 billion from the sale of Autohome shares.

Penn said that details of the investment program will be confirmed during FY17 to FY19. Penn said during Telstra’s FY16 full year results briefing that the investment will be focussed on three areas: “the network of the future”; “accelerating the digitisation of our business”; and improving customer experience.

As examples of the investments the telco expects to make the CEO flagged an increased focus on software-defined networking architecture “to build a more programmable and flexible network that we can scale easier at lower cost” as well as the impending rollout of 5G (Telstra will next month conduct trials of 5G technology using Ericsson’s 5G radio test bed).

Penn said that Telstra would also extend 4G coverage in regional areas (providing regulatory settings remain “conducive to support investment”) and boost service levels on its ADSL network.

“We will invest in the digital enablement of our sales, service, and product experiences,” Penn said.

“Our customers will increasingly be able to interact with Telstra on their terms and will be able to do so more easily and more digitally. We will also accelerate the move of apps and services to the cloud and overhaul systems that we know disrupt our customers today, such as billing. We will digitise the assurance and order-to-activate processes.

“We expect these changes will deliver a customer experience that is fundamentally better when they interact with Telstra and as we create financial benefits for shareholders.”

“Underpinning all of these initiatives is the establishment of an adaptable digital IT core architecture that will deliver a single access point to our underlying systems rather than the myriad of systems which exist today,” the CEO said.

Earlier in his presentation Penn said he was disappointed about a drop in customer advocacy on the back of a series of network outages at the telco.

“Over the second half of the year we experienced a number of issues within the mobile, fixed broadband and IP networks,” the CEO said. “And these caused disruptions for a significant number of our customers. We have taken extensive and end to end reviews of the networks involving international experts and independent experts.”

On the back of those reviews the telco in June detailed a $250 million program to boost the resilience of its networks, including $50 million for monitoring and improved recovery times for its mobile network, $100 million boost to the resilience and reliability of Telstra’s core network, and a $100 million investment on ADSL capacity.

“We’re well progressed in relation to this program of investment and we have already substantially improved our recovery times within the mobile network,” Penn said.

The CEO also noted that during the year Telstra had achieved 98 per cent population coverage with its 4G services and upgraded more than 2000 network sites to support 700MHz (‘4GX’). The company also launched voice over LTE — VoLTE — in September.

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