Vicky Brady (Telstra)
Telstra shareholders are set to vote on its mammoth corporate restructure, with the telecommunications giant plugging the new set-up's “transparency” and “flexibility”.
First unveiled in 2020, the proposed legal restructure, said to be Telstra’s biggest since 1997, will see the creation of Telstra Group, which will house four main entities: InfraCo Fixed, Amplitel (InfraCo Towers), Telstra Ltd (ServeCo) and Telstra International.
Intending to use a Scheme of Arrangement to implement key parts of the restructure, Telstra will invite shareholders to vote on the proposal in its Annual General Meeting (AGM) on 11 October.
In its newly released scheme booklet, Telstra said the restructure would create better transparency of its assets in its customer and infrastructure businesses, allowing “management to drive performance and efficiencies”.
Another listed advantage is said to be an “increased focus on [Telstra’s] customer and infrastructure businesses through separate management teams with business-specific strategies”. This, Telstra claimed, will be supported by risk teams under a group-wide risk management and compliance framework.
“It will do this while limiting disruption to the Telstra Group’s businesses, including its arrangements with NBN (Co),” Telstra claimed. “This heightened standalone focus is expected to deliver value to Telstra Shareholders over time.”
In addition, Telstra stressed that the restructure would provide “greater flexibility and optionality to realise value from the Telstra Group’s fixed infrastructure assets over time”.
On the other side of the coin, however, are the one-off costs should the potential Scheme be implemented. Regardless of whether it is successful, the Scheme is expected to cost Telstra $126 million, excluding stamp duty.
Further additional ongoing costs may incur for the Telstra Group that might not otherwise arise, the telco said, which will largely be incremental costs in connection with the administration of the new corporate structure.
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The financial services firm Grant Samuel, which was tasked with advising on the Scheme said that the potential advantages of the Scheme outweigh the disadvantages and risks, the document read.
“While implementation of the Scheme is not a guarantee of future performance or of any value-enhancing transaction, shareholders are ultimately likely to be better off if the Scheme proceeds,” the document added.
The restructure, if approved, will be led by Vicki Brady, Telstra's new CEO following Andy Penn’s retirement after seven years in the top role.
Court dates for the Scheme’s hearing have now been set down for October. If approved by the court, new business structure’s implementation is expected to start it January 2023. Once the new holding company comes into place, the telco will establish its international business under Telstra International, which will house that component of the business along with its subsea cables.
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Changes to Definitive Agreements with NBN Co will also require authorisation by the Australian Competition and Consumer Commission (ACCC) to ensure those agreements are authorised for competition law purposes.
Originally forming part of Telstra’s T22 strategy, the corporate restructure is intended to form a key component of the telco’s T25 strategy, announced last year.
Recently, Telstra announced that its total income sank 4.7 per cent down to $22 billion for the financial year ending 30 June. Earnings before interest, tax, depreciation and amortisation (EBITDA) also fell 5 per cent to $7.3 billion.
Outgoing Telstra CEO Andy Penn said Telstra’s T22 strategy had set the company up well to manage through the current uncertain economic climate and created the foundation for growth.
