Telstra to close up to 2500 telco exchanges, customers to shift to IP calling over the NBN

Telstra has detailed plans to close up to 2500 of its traditional telecommunications exchanges.

Last month, Telstra networks managing director Mike Wright said during the Telstra Vantage conference in Melbourne that the remaining exchanges would be converted into distributed data centres to support the software layer of Telstra's network.

The telco has a network of 5300 exchanges across the country, typically used to support traditional local telephone calls.

Wright said Telstra's customers would be converted to IP calling as the NBN rolled out and that the architecture built 50 years ago to facilitate calls was no longer needed.

“The cost of compute, the scale of data centre technologies, the way that’s evolving is at the heart of what we’re looking to do, which is to build a network that is basically a distributed data centre,” he said. "If you imagine … a large percentage of our exchanges becoming a distributed data centre, running all these network applications and being able to move workloads around.”

He added that it was essentially Telstra’s goal to transform the network into a distributed data centre.

“That will largely simplify and converge our networks and, by its very nature, because the compute can shift workloads, give us robustness. A ubiquitous network, one that will fundamentally transform over the next three years, and of course at the heart of this is simplification and automation. Without that, we can’t get some of the benefits.”

During Telstra's investor presentation yesterday, chief financial officer Warwick Bray backed up the plan, saying the telco could potentially rationalise half of the 5300 exchanges due to reduced accommodation requirements, as the size of electronics shrink and copper is transferred to the NBN.

"Most of our assets deliver a strategically valuable network, and, as such, their composite value is greater than the sum of the individual parts. However, we think our assets give us significant option value, and there may be opportunities to optimise," he said.

"This will enable an estimated up to 2500 or close to half of our exchange sites to be potentially rationalised. Our initial view is that their market value less remediation costs would be more than their current written-down book value of approximately $1 billion."

Bray said the telco would continue to review the value of the assets on its balance sheet, including land and buildings.

Telstra also updated its guidance for the full 2018 financial year, expecting revenue in the range of $28.3-$30.2 billion and EBITDA in between $10.7-11.2 billion.