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Telstra dishes out additional AU$3b for network spend

Off the back of its AU$5.8 billion annual profit, Telstra has announced it will be investing AU$3 billion into what it called next generation network leadership, digitisation, and customer experiences.
Written by Asha Barbaschow, Contributor

Telstra has announced it will be sinking an additional AU$3 billion over five-years to improve its infrastructure to cope with the likes of augmented reality, the Internet of Things (IoT), and the increasing use of mobile devices.

While presenting the telco's 2015-16 financial results, Telstra CEO Andrew Penn explained that the AU$3 billion investment is on top of the company's normal capital investment program, which he said usually extends to anywhere between AU$3.5-$4 billion a year.

"We're talking about investing up to AU$15 billion over the next three years into the infrastructure and the technology to enable our customers in Australia and internationally to take advantage of the wonderful things that technology and innovation provides," he said.

Telstra will be sinking the AU$3 billion into the "network of the future", accelerating the digitalisation of the Telstra business; and improving customer experience.

"Consumers will experience rich communication services using capabilities such as voice over LTE, integrating messaging, video, and document sharing.," Penn said.

"Sporting events and other media will be greatly enhanced using broadcast services and video streaming based on LTE broadcast technology and the world of augmented reality, autonomous driving, and robotics will also be enabled across our network.

"For our business customers, new opportunities in productivity and business insight will be offered. Everything from agriculture to banking, healthcare to transportation services will be enhanced by millions of senses and devices that are arriving with the Internet of Things and similarly, application in areas such as drone technology and remote healthcare diagnostics will explode over the next four years."

Penn said the demand for services in the telecommunications industry is growing very strongly, noting that over the past five years, data traffic on the Telstra network has experienced a seven-fold increase, with mobile traffic in a similar period increasing almost nine-fold.

"If we have seen this much change in the last five years, just imagine what 2020 is going to look like as the rate and pace of technology and innovation accelerates," he said.

"That's the world of the future and that's the world we're building for, and that's the world we're investing in."

For the 2015-16 financial year, Telstra reported net profit after tax of AU$5.8 billion, AU$26.7 billion in revenue, and a decrease in earnings before interest, tax, depreciation, and amortisation by 0.6 percent to AU$10.5 billion.

Despite the results, Penn said he was disappointed in the opinion mass-market customers have held on the company this year.

"The one thing I am disappointed about for the year is that despite our strong performance, our customer advocacy results fell four points," Penn said. "We did not deliver to the extent we should for our customers."

"It is clear that we have more to do to improve our systems and processes to ensure that we consistently deliver a great customer service experience.

"Our customers and our networks are our biggest asset and it is critical that we invest in them."

Over the past year, Telstra experienced seven network outages, with the most recent instance bringing down banks, hospitals, and an airline. As a result, the telco announced a network investment of AU$250 million to improve mobile network resiliency, increase its core fixed-line network's reliability, and up its ADSL broadband capacity to cope with demand.

This latest AU$3 billion program sits outside the resiliency project, which Penn said was progressing well. He also said Thursday's announcement was not triggered by the network outages.

"We should not lose sight of the fact that we continue to have the best networks in Australia with our mobile network providing the best coverage at the fastest speeds," the CEO said.

"We have always had a tendency and we have always been committed to be ahead of the technology curve and we are committed to continue to do so. As we did we did with 2G in the late nineties, as we did with 3G 10 years ago, as we did with our Next IP Network, as we did with LTE.

"We believe the opportunity to do so again is here and now.

"I'm confident that with the AU$3 billion strategic investment in digitisation and networks of the future ... that it will further enhance our leadership position."

Penn said he will be heavily involved in the program that he will be handing over to Telstra's executive team.

"There is nothing more important to the company than this investment," Penn clarified.

"This is about building for the future."

Penn did not seem fazed that as Australia's largest technology company, Telstra would be making this AU$3 billion play without a permanent chief information officer, chief operating officer, or a chief technology officer, with all three announcing their departure from the company in quick succession this year.

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