The Telstra Group Ltd (ASX: TLS) share price is down 2% after the company announced potential job cuts and FY25 guidance.
Organisational changes to cut costs
Telstra is resetting its Telstra Enterprise business to decrease the cost base and improve delivery for customers. This segment is still facing challenging market conditions.
It’s going to reduce the number of NAS (network applications and services) products in the market by close to two thirds. Second, Telstra will shift to a simplified customer sales and service model. Third, there will be a reduction in the cost base of the ‘Telstra Purple’ tech services business.
The Enterprise reset, along with other organisational changes, would “potentially see up to 2,800 roles removed” with the majority of this to occur by the end of the 2024 calendar year.
Telstra is also planning to move its global business service function into other parts of the business.
The company is focusing on a range of actions to reduce its non-labour and indirect labour costs. With these actions, Telstra expects to achieve $350 million of its T25 cost reduction by the end of FY25.
To implement these costs, Telstra expects one-off costs of between $200 million to $250 million across FY24 and FY25.
Inflation linked price rises removed
Telstra said it will update its customer terms for its postpaid mobile plans to remove the CPI-linked annual price review.
It will not be making a CPI-linked annual price change to postpaid mobile prices in July 2024. In the last few years, the telco had increased prices in line with inflation, which was a boost for the Telstra share price.
Telstra’s CEO said the company will continue to review its pricing and any changes will be communicated to customers.
The company revealed its mobile business continues to perform “strongly”, with growth in subscribers numbers for the first four months of the second half of FY24 “consistent” with the first half of FY24.
Profit guidance
Telstra reiterated its FY24 guidance and revealed FY25 underlying EBITDA guidance of between $8.4 billion to $8.7 billion. That compares to FY24 underlying EBITDA guidance of between $8.2 billion to $8.3 billion, suggesting growth of at least $200 million in FY25.
The company is still aiming for good growth in FY25, as per the T25 strategy, for underlying EBITDA, profit / earnings per share (EPS) and return on invested capital (ROIC).
Final thoughts on the Telstra share price
With Telstra guiding for more profit growth in the next financial year, I think there’s good value with Telstra shares. It has resilient profit which is expected to grow. The changes it’s making with its enterprise division will hopefully help profit growth in the coming years.
I’d be happy to buy at this Telstra share price, along with a few other ASX dividend shares for a dividend-focused portfolio.