In morning trade the Telstra Corporation Ltd (ASX: TLS) share price has pushed higher following the release of an update on its impairments and restructuring costs.
At the time of writing the telco company's shares are up 0.5% to $3.58.
What was in the update?
This morning Telstra announced that due to the good progress it has made with its T22 strategy, it expects to make a non-cash impairment and write down of the value of its legacy IT assets by around $500 million.
In addition to this, the telco giant is increasing guidance on its restructuring costs for FY 2019 by around $200 million after bringing forward consultation on proposed job reductions.
Jobs to go sooner than expected.
In respect to its restructuring costs, the company revealed that it is ahead of plan on the simplification of its structure and ways of working announced as part of T22 strategy.
As a result, the company has commenced consultation with employees and representative unions on proposed job reductions previously expected to be announced in the first half of FY 2020. This will result in the relevant restructuring cost being brought forward from FY 2020 to FY 2019.
According to the release, Telstra expects to have announced a reduction of approximately 6,000 roles by the end of the financial year, which puts it on track to reach the previously announced net cost out target of $2.5 billion by the end of 2022.
But as a result of bringing these announcements forward, Telstra expects total FY 2019 restructuring costs to increase from around $600 million to around $800 million. While impacted employees will not be leaving the organisation until early FY 2020, consultation is expected to conclude in mid-June and therefore the costs will be included in Telstra's FY 2019 results.
Management also advised that if this additional charge were to occur in the current financial year, it expects total remaining restructuring costs beyond FY 2019 from T22 initiatives to be in the vicinity of $350 million.
Telstra's CEO, Andrew Penn, said: "We understand the significant impact on our people and the uncertainty created by these changes. We are doing everything we can to support our people through the change and this includes the up to $50 million we have committed to a Transition program that provides a range of services to help people move into a new role. We expect to have announced or completed approximately 75 percent of our direct workforce role reductions by the end of FY19."
He added: "We will continue to see role reductions as we replace our legacy systems, digitise and simplify how we work, and respond to things like declining NBN and call volumes, but if a final decision is made on the proposal announced today we expect the majority of our T22 restructure will be behind us. Overall we are on track in relation to our T22 program."
Another positive for shareholders is that, other than these charges, Telstra has reaffirmed its FY 2019 guidance.
Elsewhere in the telco sector today, the TPG Telecom Ltd (ASX: TPM) share price is down 1% and the Vocus Group Ltd (ASX: VOC) share price has edged 0.1% lower.
