Telstra brings back McKinsey for T22's post-transformation strategy

25 April 2021 2 min. read

Telstra has brought back consulting giant McKinsey to advise on the telco’s next strategic steps, with the previously devised T22 transformation agenda now nearing completion.

American strategy and management consulting giant McKinsey & Company has returned to Telstra to follow up on the Australian telco’s ‘T22’ digital transformation project. Originally brought in in 2018, McKinsey helped devise the huge organisational restructure and operations overhaul aimed at uncovering $2.5 billion in savings on core fixed costs by 2022, including the shedding of some 8,000 jobs – or close to a quarter of Telstra’s workforce.

“The rate and pace of change in our industry is increasingly driven by technological innovation and competition,” Telstra CEO Andrew Penn said at the time. “We have worked hard preparing Telstra for this market dynamic whilst ensuring we did not act precipitously. However, we are now at a tipping point where we must act more boldly if we want to continue to be the nation’s leading telecommunications company.”

Telstra brings back McKinsey for T22's post-transformation strategy

The four-year time-line for the T22 restructure is now drawing to an end, with all customers due to have been migrated to a simplified product range by mid-year. Another of the four T22 pillars, the creation of standalone infrastructure business unit Telstra InfraCo was instituted in 2018, while job cuts are ongoing, with 7,500 having already been axed.

Telstra is set to announce its next strategic steps in November, with the post-restructure phase expected to extend to 2025. Somewhat unusually, Telstra has spoken of the latest McKinsey engagement, but deflected as to the extent of the consulting firm’s input into post-T22 strategy. “It is not unusual in strategy development work to get external perspectives from a number of different leaders in technology trends to help understand best practices around the world,” a Telstra spokesman told the Australian Financial Review. “And that has included McKinsey.”

In addition to other industry experts, the spokesperson also noted that Telstra had been receiving advice from senior venture capitalists on “global dynamics”, while stating that strategic planning at the telco was still being guided by Penn and Chief Financial Officer Vicky Brady (ex-KPMG), who is leading the in-house strategy team. In February, Telstra announced a double-digit fall in revenue over the first half of the financial year, but expects growth moving forward.

While the company will fall about one fifth short of its goals according to the half-yearly financial report, an analysis from Boston Consulting Group has given Telstra’s transformation the tick of approval.

BCG in its report warned that two thirds of large local technology transformations either outright fail or fall short of value-adding targets, but senior BCG partners and report authors Patrick Forth and Stefan Mohr cite Telstra as one of Australia’s notable exceptions.