Telstra plans to split itself into three separate business units in a restructure that paves the way for the telco to spin off its infrastructure assets. It’s the biggest corporate change since the government started taking Telstra private in 1997, the company said in a statement on Thursday.
The news, which has been mooted for some time, saw the shares rise almost 6% to $3.15 before easing to end the day up 3% at $3.08.
Telstra is the type of stock that should benefit if there is a true rotation out of techs and similar COVID-friendly stocks, back into value companies.
Under the proposed restructure, announced on Thursday at the company’s annual investor day, Telstra’s infrastructure business (called InfraCo at the moment) will be divided into two separate units – InfraCo Fixed, which will own and run Telstra’s fixed-line assets, and InfraCo Towers, which will own the mobile infrastructure.
A third unit, ServeCo, will own the active parts of Telstra’s mobile phone business, including the radio access network and spectrum assets.
The last big revamp from Telstra was back in 2018 when it revealed its ambitious T22 plan (to be completed by 2022).
That saw Telstra cut over 6,000 jobs (which gave profit margins a boost) and give its mobile and fixed plans a complete makeover.
InfraCo was established as part of the T22 strategy to provide investors a clearer idea of the value locked in Telstra’s infrastructure assets (tower, exchanges, pipes and ducts) and also give the company an opportunity to buy the National Broadband Network.
Telstra CEO Andrew Penn said on Thursday that InfraCo was now ready to take the next significant step as a business.
“With Telstra InfraCo now a fully operational stand-alone business unit and the NBN roll-out effectively complete, now is the time to take the next step in realising our T22 ambitions, including monetisation of our infrastructure assets where appropriate,” he said in a statement ahead of the investor day function.
“The proposed restructure is one of the most significant in Telstra’s history and the largest corporate change since privatisation. It will unlock value in the company, improve the returns from the company’s assets, and create further optionality for the future.”
The restructure is to be done by December next year. The three business units will operate under the parent Telstra Group.
You can bet that once this is done. Telstra will be under rising pressure to spin those off to shareholders (like Wesfarmers spun off Coles) or sell them to deep-pocketed investors, such as super funds looking for infrastructure/annuity-style plays (remind anyone of Macquarie where they have had extensive experience with communications – TV – towers?).
Mr. Penn said the company was “ very conscious of the many stakeholders, including shareholders, who will have an interest in these changes and that is why we have announced our intentions today, well ahead of implementation, so we can undertake a comprehensive consultation program to explain the many benefits this structure delivers.
“We will work very closely with our partners, our people, and other stakeholders throughout this process, and will provide an update on progress at our half-year results in February 2021.”
