2020 CEO Survey: Andy Penn, Telstra

We are at a critical moment in time for the telco industry and the country, says Telstra CEO Andy Penn

Telstra CEO Andy Penn at their HQ in Melbourne. Picture: Aaron Francis for The Australian

What are the three enduring lessons or changes to flow from COVID-19?

The acceleration of global digitisation, as every industry was forced to move further online in one way or another, has reinforced just how important the underlying telecommunications networks are to the success of our digital economy. There is now a much greater understanding of the foundational role that telecommunications plays and the importance of encouraging the necessary investment and innovation to stay at the forefront of developments globally. Hopefully we see that better reflected in future policy conversations and decisions by governments and regulators as getting the settings right will be vital to our digital economy ambitions as a nation.

The next most important lesson has been around the workplace – how we work, when we work, and where we work. COVID-19 has taken the future of work in a totally new direction, a direction that is increasingly virtual, remote and distributed rather than physical and centralised. It sounds obvious, but work is now something you do, not somewhere you go, and that’s a big change for a lot of people. The lesson is that successful organisations will be those that respond to this change at their core, offering flexible, geographically dispersed opportunities, with a hybrid of digital and physical tools and spaces that are tailored to specific roles and technology needs, preferences and employee expectations.

My last point is not so much a lesson as a reflection, and it’s to highlight our communal response to the different crises of 2020. I think a large part of what has helped us negotiate through these events as a country – whether it was the bushfires early in the year or across the many months of the pandemic – has been the realisation that we all have a role to play and a contribution to make. I think the way we have collectively responded has seen us come through what has been an extraordinarily tough year as well as we could have hoped.

How would you rate the shape of the Australian economy as we head into the new year?

I am generally optimistic about the outlook for 2021. There are obviously pockets of the economy that are struggling and will continue to need support, but overall I think we are doing better than most would have expected. I think a large part of this is due to the way we have, as a wider community, been able to deal with the crises 2020 has thrown up. We need to be aware of the potential impacts of low interest rates and large budget deficits, but not necessarily be worried about them if they are achieving the right outcomes in the short term given the challenges we are facing.

What three reforms are needed to sustainably grow the economy?

The reforms we need to be focused on are those that will help us rebound from the COVID-19 impacts as quickly as possible, and help us be prepared to respond to similar events in the future. Not surprisingly I see these reforms as largely being related to doing what is needed to ensure the success of our digital economy. As a nation we have achieved in a few months what might have taken us years to progress, and it is important we do not lose that momentum. My top three focus areas are:

The continued fast-tracking of policy and regulatory changes to break down longstanding digital roadblocks. COVID-19 has shown how quickly change can be made and embraced (eg telehealth consults, paperless scripts) to online learning, remote working and e-commerce. This focus on how digitisation can improve the delivery of services across the board needs to continue.

We are at a critical moment in time for the telco industry and the country. COVID-19 has reinforced just how important telecommunications is to Australia’s aspiration to be a leading global digital economy. With the initial build phase now complete, NBN Co and the government’s focus needs to be on maximising take-up and usage and getting the right policy settings to deliver on this ambition. To get there we need a strong policy vision for the next ten years, with a number of key priorities for NBN Co and the government to act on, including a long term upgrade path to provide the industry as much certainty as possible so it can invest with confidence to support the NBN’s long term success.

With the increased digitisation of the economy we also need to ensure the networks, platforms and connections that underpin this are secure and protected. The government is doing an enormous amount of work in this space which is important and welcomed. The dramatic acceleration in digitisation, increased connectivity and converging technologies like 5G, cloud, IoT, Edge Computing, and AI demonstrate how important it is that we get this right.

What are the three best growth opportunities for your company in 2021?

Telstra is the clear market leader in 5G already and this reinforces that Telstra has, and will retain, by far the best network in Australia. We are confident our leadership in 5G will enable us to achieve second half FY21 ARPU and EBITDA growth in mobiles.

For our business customers, we need to complete the transformation of our Enterprise business including with initiatives such as Adaptive Networks to enable Australian companies to manage their connectivity needs and respond more quickly to changing dynamics. We expect to bring Enterprise back to growth in fiscal year 2022 at the aggregate level in both revenue and EBITDA.

While our fixed margins will remain challenged in 2021 due to the impact of the nbn, the T22 changes we are making will enable us to improve our Fixed EBITDA and we are targeting a mid-teens nbn resale margin in fiscal year 2023.

As well as restoring growth in our core business, we intend to build on the strong performance we have achieved in Telstra Health. The business has built an impressive ecosystem of digital services that can help with everything from a simple consultation with a GP via a telehealth platform to delivering paperless prescriptions to helping create new integrated capabilities in healthcare and aged care at a national level.

What impact will digital transformation have on your company?

We have already fundamentally reshaped our business from a digital perspective. Our T22 strategy was built around the radical simplification and digitisation of our business, removing legacy systems and processes and introducing new agile ways of working. We were preparing the company for an accelerating digital economy and through the work we have already done with T22 we are exceptionally well placed to respond and now lead in this new environment. The foundational changes we have already made to our digital systems and functions over the last two to three years are generational and we have only just scratched the surface of the benefits they will deliver.

How would you rate business, state and federal government performance this year?

Everyone has been challenged this year and I think for the most part businesses and governments have contributed strongly to our response to COVID-19 as a nation. Governments at all levels have responded well through stimulus measures to help people, businesses and communities that need it. On balance I think they have got it pretty much right and that’s reflected in how we are positioned globally in terms of our COVID-19 response.