Telstra to book $500m legacy IT write-down, cut 6000 roles by EOFY

Telco expects increased restructuring costs in FY19 as a result of ‘good progress’ on T22 strategy

Credit: Dreamstime

Telstra said that by the end of financial year it is expected to have cut 6000 roles as part of its T22 strategy.

The telco said today that some of those employees will not leave the business until early in FY20; however, because it has brought forward the “consultation” period, which will conclude in mid-June, associated costs will be included in its FY19 results.

As a consequence, Telstra today increased by $200 million guidance on restructuring costs for FY19. FY19 restructuring costs are expected to be $800 million. Remaining restructuring costs for T22-related initiatives are expected to be around $350 million.

“We understand the significant impact on our people and the uncertainty created by these changes,” Telstra CEO Andy Penn said in a statement.

“We are doing everything we can to support our people through the change and this includes the up to $50 million we have committed to a Transition program that provides a range of services to help people move into a new role. We expect to have announced or completed approximately 75 per cent of our direct workforce role reductions by the end of FY19.”

“We will continue to see role reductions as we replace our legacy systems, digitise and simplify how we work, and respond to things like declining NBN and call volumes, but if a final decision is made on the proposal announced today we expect the majority of our T22 restructure will be behind us,” the CEO said.

Telstra expects a net reduction of 8000 employees over three years as part of T22, which is the name for a strategy unveiled in June 2018 to help the company address falling margins and increased competition in the telco sector. Telstra is seeking to cut costs by $2.5 billion by the end of 2022.

T22 has already seen a number of high-profile executives depart as Telstra undertakes a significant internal realignment. The telco is also preparing to begin transitioning more parts of its business to an Agile operating model from July.

Telstra today said it would write down the value of legacy IT assets by $500 million as a result of “good progress” on T22. The telco has made a significant investment in modern platforms since 2016, including rolling out ServiceNow and replacing its aging Siebel CRM system with Salesforce.

“We’re replacing our billing systems, our order management systems, our customer interface systems, and all of these systems are being built on a new technology stack in the cloud with an extensive ecosystem of APIs,” Penn said in December as part of a briefing on T22’s progress.

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