Where to now for long term investors of Telstra, page-9603

Telstra needs T22 to fire on all cylindersBy Supratim AdhikariAugust 14, 2020 — 12.00amShare on FacebookShare on TwitterSend via EmailNormal text sizeLarger text sizeVery large text size0Leave a commentTODAY'S TOP STORIESCORONAVIRUS PANDEMICPatient zero for Victoria's second wave was not a security guardAdd to shortlistCORONAVIRUS PANDEMICAndrews says relationship with PM is as strong as at the start of the pandemicJust nowAdd to shortlistISRAELI-PALESTINIAN CONFLICTIsrael and the UAE reach historic deal to normalise relations, with US helpAdd to shortlistCORONAVIRUS PANDEMIC'Desperately calling for staff:' Victoria takes over three nursing homesAdd to shortlistFor an earnings season discombobulated by COVID-19 Telstra has bucked the trend by offering the market a firm guidance for FY 2021. One reason for such a sanguine outlook could be that Telstra boss Andrew Penn is looking to get his “T22” overhaul plan back into full gear as quickly as possible.The overhaul, critical to helping Telstra combat the ill-effects of the National Broadband Network on its books, has been slowed down by the pandemic, especially when it comes to removing the 8000 jobs from its overall workforce.Telstra chief executive Andrew Penn said the result showed the telco's resilience.CREDIT:TASH SORENSENWhile Telstra's immediate response to the pandemic was to offer support to customers and put the job cuts on ice, it has to get moving to ensure that shareholders don't feel left out.By February, Telstra will get the razor wire out again and start cutting costs, which means job cuts will be back in the picture. A large swathe of contractors will be shown the door but there will be deeper cuts internally as well.Advertisement"We will have to make these hard decisions, we have to come back to them because this is about getting the right balance between supporting our people, our customers and delivering for our shareholders," Penn says.Difficult as these steps might be, and Penn isn't the sort of CEO who shies away from making hard calls, they are crucial for Telstra to be in a position where it can keep paying the 16¢ dividend.RELATED ARTICLETELECOMMUNICATIONSTelstra to keep call centres in Australia even after COVID-19 passesAdd to shortlistApart from the cost-cutting, Telstra's bid to become a leaner, fitter organisation relies on its ability to use technology to streamline its operations. Automation and digitisation are words that Penn and his team have been quick to spout lately, and they are going to figure even more heavily over the next six to eight months.Taking costs out of the business, making operations more efficient and pumping money into reinforcing its mobile network are the levers that Penn has at his disposal when it comes to making sure the underlying earnings for fiscal 2021 ends up landing between $6.5 billion to $7 billion.Other than that, the future trajectory of Telstra fixed broadband and mobile business is beholden to forces outside of the telco's control. The NBN is set to slice another $700 million from its earnings and there's no sign of wholesale prices coming down anytime soon. Telstra's is in no position to raise prices on its NBN plans to lift its shrinking margins on that front.Meanwhile, the mobile business is stuck in a rut as the revenue derived from international roaming charges continues to evaporate and budget-conscious consumers steer clear of premium plans. The investment in 5G will inevitably bear fruit for Telstra but translating the ongoing investment into the technology (infrastructure and spectrum) into revenue will be a lengthy process, unless the next 5G-enabled iPhone spurs customers to rush into the technology.Penn's options are relatively limited and while the pandemic looks set to burn an extra $400 million hole in Telstra's books, getting back to business with T22 has to be his biggest priority.