Telstra Corporation Limited (ASX: TLS), Australia’s leading telco company, has seen its shares rise to a six-month high, showcasing a strong market performance driven by strategic decisions, including significant job cuts and adjustments to mobile pricing.
This comes off the back of Telstra’s recent share price struggles, which at times hit 1-2 year lows.
Impact of Telstra Job Cuts
On May 21, 2024, Telstra announced substantial organizational changes aimed at simplifying its operations and improving productivity.
Specifically, these changes included reducing up to 2,800 roles from its direct workforce.
Although difficult, this decision is part of Telstra’s broader strategy to streamline operations, reduce costs, and enhance efficiency.
CEO Vicki Brady emphasized the necessity of these measures to maintain investments needed to support the growing data volumes on Telstra’s networks and deliver improved connectivity for customers across the country.
By reducing its workforce, Telstra expects to save approximately $350 million in costs by the end of FY25.
Consequently, these savings will bolster the company’s financial health, allowing it to reinvest in infrastructure, technology, and innovation, thereby driving long-term growth and profitability.
Furthermore, the job cuts are a proactive step to align the company’s cost structure with its revenue and market dynamics, ultimately improving its competitive position.
Mobile Pricing Adjustments
In addition to job cuts, Telstra announced changes to its mobile pricing structure.
Effective from August 27, 2024, for post-paid plans and October 22, 2024, for pre-paid plans, the company will increase prices on most of its mobile plans by $2-$4 per month.
This move follows the decision to remove the annual CPI-linked price review for its post-paid mobile plans, allowing for more flexible and market-responsive pricing strategies.
The pricing adjustments are aimed at balancing the cost of living pressures faced by customers with the need to invest in technology evolution and meet the growing demand on its mobile network.
Telstra’s mobile network has seen a significant increase in traffic, growing approximately 3.5 times over the past five years, with annual growth rates of around 20%.
To manage this demand, Telstra invested $1.3 billion in mobile spectrum in FY24, enhancing the network’s capacity to support more data, faster speeds, and a more consistent customer experience.
Market Reaction and Future Outlook For Telstra
The strategic job cuts and pricing adjustments have been well-received by investors, leading to a notable increase in Telstra’s share price.
These measures demonstrate Telstra’s commitment to maintaining a strong financial position while continuing to invest in its network and customer service.
Telstra’s early guidance for FY25 projects an underlying EBITDA of $8.4 – $8.7 billion, reflecting confidence in its ability to grow mobile revenue and profitability.
The company remains committed to its T25 strategy, which focuses on improving customer experience, simplifying operations, and driving sustainable growth.
Conclusion
In conclusion, Telstra’s recent organizational changes and pricing strategies have positively impacted its market performance, with shares reaching a six-month high.
The job cuts, though challenging, are a critical component of the company’s effort to streamline operations and enhance financial stability.
Meanwhile, the pricing adjustments ensure that Telstra can continue to invest in its network and meet the increasing demands of its customers.
As Telstra navigates these changes, it remains well-positioned for future growth and looks like a great buy for potential investors.
