Telstra slashes ICT spend in FY10

Spend down 42 per cent on 2009

Telstra may have slashed its IT spend by almost half over the last 12 months, but the troubled telco has still managed to rack up a sizable $652 million in investments in the year to 30 June 2010.

The spend, a 42 per cent decline from a peak of $1.127 billion in the year to 30 June 2009, reflects, according to Telstra, a reduction in “demand driven programs” and the completion of several major projects in 2009 and the general wind-down of its five year transformation.

Detailing the reductions in its Directors’ Report released to the ASX, the company said business improvement spend had decreased by $487 million during the year as the focus shifted to system enhancements involving the completion and delivery of remaining functionality following the major IT program releases of fiscal 2009.

The company also noted that it would continue to invest in ICT to remain competitive in a restructured industry as competition intensifies and new telecommunications infrastructure such as the National Broadband Network is built.

“Our network and information technology investments, including the world class mobile (Next G) and fixed (Next IP) networks are providing us with the capability to streamline our processes and provide integrated telecommunication services that are simple and valued by our customers," the report reads. "This is differentiating us from our competitors and providing us with a capability to satisfy customers needs.”

Telstra chief executive, David Thodey, claimed the transformation had been "great" and had given the company "great platforms" to go forward with. Thodey also did not rule out the possibility of the introduction of a second transformation program in 2012.

"We can never say never, but we feel this [transformation] is a well considered set of plans..." he said.

Detailing specific IT spend during the 2010 financial year, the company said lifecycle maintenance expenditure had increased by $27 million due to investment in data centre capacity growth.

Spend on capex relating to new revenue growth increased by $65 million as numerous projects were commenced in fiscal 2010, including Telstra’s cloud computing strategy and initiatives related to set top boxes

Sensis domestic spend decreased by $118 million following the completion of a significant core platform refresh program and completion of the integration fabric/downstream project.

International spend had decreased by $206 million this year following capacity acquisitions and network upgrades in the prior year and reduced spend by TelstraClear on augmentation and connection.

Customer demand and experience spend had fallen by $404 million due to a reduction across demand driven programs relating to new estates, redevelopment and order driven services.

According to the company, the investment has paid off with a number of technological innovations coming through during the financial year including an upgraded to the Next G network to provide capability for 42Mbps peak network downlink speed.

Telstra had also worked with Nokia Siemens Networks to conduct trials of next generation mobile technology, achieving peak network speeds of 100Mega bits per second (Mbps) download and 31Mbps upload.

The year had also seen a quadrupling of capacity on the Next IP network between Melbourne and Sydney to meet growing demand. The capacity upgrade delivers transmission at 40Gbps.

The company had also combined its Telstra Networks and Services and Information Technology business segments into one, Telstra Operations, with the goal of further driving the company's "network and technology excellence".

As reported by Computerworld Australia, the company’s chief financial officer, John Stanhope told investors in October that Telstra’s IT transformation budget had run over by $1.5 billion on the original $12 billion forecast when the project commenced in November 2005.

“I want to emphasise it is not an overrun in our spend,” said Stanhope at the time. “Back in [financial year] 04/05 there were things that we did not have in scope. It is not a concern, therefore, and we actually delivered $1.3 billion less in spending in other areas of our transformation, meaning that the total overspend in the original budget of $12 billion program is around two per cent,” he said. “So, there has been no transformation cost blow out at Telstra, which is often said.”

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Tags Telstrafinancial resultsDavid Thodey

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