Telstra boosts capex to A$1bn a year for three years
Australia’s Telstra is increasing its capital expenditure to A$3 billion (US $2.3 billion) over the next three years after a series of network outages.
CEO Andrew Penn said the company will spend the money on customer-focused investments in its networks of the future and digitisation. At the same time Telstra will spend $1.5 billion (US $1.15 billion) buying back shares.
Penn made the announcements as Telstra released its financial year 2016 results. He said the company would increase its capex to sales ratio to about 18% in each of the next three years. This is the highest since 2008-09, when Telstra was building up its 3G network.
“Our customers and our networks are our biggest assets. We must invest to set new standards and deliver excellent experiences for our customers,” said Penn, who has been CEO since May 2015, after three years as CFO and head of strategy.
“This will position us to deliver significant customer benefits and reinforce our market differentiation over the longer term. It will also deliver business benefits such as capital efficiency, reduced operating costs and increased revenue.”
Behind Penn’s decision is a series of outages that has embarrassed the company. After the most recent, at the end of June, Penn promised that Telstra would spend an extra A$250 million (US $192 million) to fix the problems.
“There are a number of immediate actions that we believe will improve customer experiences. We will simplify products and platforms – we need to retire old technology and systems that slow down and complicate how customers are served,” he said.
Penn said a significant proportion of the incremental investment would go towards transforming the next generation of networks. “Our networks and the products and services they support are integral to the Telstra brand. Network differentiation is a long-standing contributor to our success, underpinning our clear market leadership and shareholder returns,” he said.
He said Telstra would progressively confirm details of the investment programme to maintain strategic advantage in a heavily competitive environment.
Short term actions to remove customer pain points would be followed by more significant and longer term improvement of the customer experience focused on digitising and simplifying large parts of the business.
“We have plans for consumers, small and medium sized businesses, domestic and international enterprise users, governments and our wholesale customers. The investment is about setting the pace for the network and company of the future, just as we have done in each of the previous network generations.”