Telco giant flags retail restructure

Telstra Discovery storeVita Group says it not looking to reduce the number of Telstra stores it operates after the telco giant flagged a restructure of its retail network, but will also not add any stores.

Vita shares have plummeted 30 per cent after it also warned its payments from Telstra could be reduced because of competition in the mobile market and the impact of the rollout of the national broadband network.

The two companies are currently discussing a new remuneration and commercial agreement, and any plans to expand Vita’s store network have been suspended until an agreement is reached, Vita chief financial officer Andrew Leyden said.

“You shouldn’t read into that that we’re actively looking to reduce the portfolio,” he told investors on Thursday.

Telstra wants to reorganise its store network into geographical clusters and Vita, which operates 107 stores in 35 of those 48 clusters, says it supports the move as it had already been rolling out a similar strategy for the past three years.

Leyden said the company expects to retain a “sizeable proportion” of the network.

With constantly changing market conditions and new products coming onto the market, it was prudent to renegotiate commercial terms and remuneration, as the two companies had done in the past, he said.

“The industry is changing all the time and we have to look in the industry and see where the opportunities to drive profitability will be,”Leyden said.

Leyden did not provide any indication of a time frame for the conclusion of talks with Telstra.

Vita expects to post record earnings of $63 million to $66 million for the 2016/17 financial year, up from $62 million in the previous year.

However, a reduction in Telstra’s remuneration that took effect between December and February would impact earnings in the second half of the current financial year, it said.

Vita shares dropped 68 cents at $1.55, their lowest level in more than two years.

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