Xx) Telstra

. Started as a sate-owned monopoly in ICT industry in Australia but in 1990s when it was privatised and faced competition from mobile phone players like Optus, Vodaphone, etc and more recently NBN.

. It is a telecommunication firm that is trying to avoid becoming a "dumb-pipe" Internet provider by developing a growth strategy around 4 criteria

i) grow network application services (NAS)

ii) invest in Asia

iii) build a successful media and IPTV business

iv) build new revenue streams like software, e-health, etc

plus earnings to be accretive & return on invested capital within 3 years

. 40% of Telstra's revenue comes from mobile phones, mostly data; previously, revenue was dominated by voice calls

. Under threat from global tech giants and new industry players like Google, Apple, etc with smart phones, etc

. Started investing in Australian and USA start-up companies & Chinese Internet services (like car sales website, eg Autohome) but low margins businesses

. Philippines ICT industry with San Miguel (large beverage/food conglomerate based in Philippines)

. Moving into health care, ie partnering with Medgate, a major Swiss provider of on-line healthcare services & virtual doctor consultation

. Negotiating to buy Pacnet for $ 1b. (enterprise services and submarine cable company)

. Telstra had 6 main challenges (2015)
- customer control
- connectivity
- integration
- admissions
- ehealth
- efficiency

NB As increasing demand for mobile services via the Internet of things occur, with content being important, Telstra's core business is now connectivity with increasing focus on developments in media (HFC network, Foxtel, etc), Asia, software development, e-health (its ReadyCare program where GPs are available over the phone for consultations), connecting cars, etc.

David Thodey (when CEO), Telstra pulled out of Sensis, SouFun & CSL.

In 2016 Telstra appears to be performing well with record revenues and is dominating the Australian mobile and broadband markets. On the other hand, there are challenges for the A$ 66 b.  telecom, eg

- Telstra's phone and Internet infrastructure vs. A$ 56 b.National Broadband Network

- web based services such as WhatsApp, Skype, etc

- major overseas investments (see below)

These have made the copper-line call revenue fall by 41% in the past 7 years

Telstra needs to invest in

i) being agile to speed up its processes

ii) innovation, eg  digitalisation of business, government and health sectors with high-speed broadband, Internet video services, cloud computing, etc.. This includes

- Gurrowa Innovation Lab (access to a global innovation network of universities, start-ups and strategic partners that concentrates on solving customers' problems , ie creating value for customers; employs staff who are adaptable and curious; uses multidisciplinary teams with engineering expertise, focusing on customer orientation, with an understanding of the end users' experience, etc. Some of the opportunities identified include cloud capabilities, health business, etc)

- other examples include muru-D (an incubator that works with the start-up community), Telstra Ventures (made 26 investments including Telstra Health & Ooyala - software group), telstra Home, (built organically to deliver the Internet of Things to people's homes). Health is a major opportunity with A $105 b. spent on health care in Australia (2003/14); over 2 years Telstra spent around A$ 240 m. in buying digital health business. Also, it is expanding into quantum computing plus collaborative relationships with Ericsson and Cisco

iii) expansion, eg network applications (including buying Pacnet which has significant connectivity infrastructure and services such as managed networks, cloud and network security) and e-health (see above) plus venturing into riskier markets like Indonesia, Philippines, etc.. In the Philippines, Telstra plans to partner San Miguel (local beer and food giant) to build the country's third national mobile network (estimated to cost around $US 3.5 b.); Telstra plans a 40% stake in the venture.  As the Philippines lacks fixed-line infrastructure, most people will experience broadband from smart phone, not a computer.

Telstra's is previous overseas investments in Hong Kong, China, Indonesia and Vietnam have given varied results, eg it wrote off around A300 m. in China on Octave Investments; it lost A$ 2 b.  on its investment in Hong Kong Telecom. On the other hand, during Sol Trujillo's tenure, Telstra made good money in China from the real estate portal (SouFun) and a car sale website (Autohome)

Telstra is repositioning itself as a technology company (rather than a telco) with its cloud and network applications. It is focusing on taking mid-term risks for long-term gain.

Telstra has also increased its investment in core mobile business with A$5 b. spent to improve the service while preparing for the launch of 5G services with Ericsson.

Starting in 2005, Telstra successfully focused on its mobile network, as demand for traditional fixed line services had peaked. As a result, by mid-2018 it had around 50% of the Australian mobile market.

Telstra has been successful with its 3G and 4G mobile network but not so successful in expanding into Asia, health and Internet businesses. In mid-2018 it planned to split into an operational business and an infrastructure company.

NBN Co (set up to upgrade telecommunications provider's existing copper-line infrastructure to a fibre to the node NBN) and for Telstra
"...effectively renationalising its wholesale business and ripping out billions in earnings..."
Max Mason 2018

In 2011, Telstra  agreed to an A$ 11 b deal with the Australian Labour Government to hand over its old copper and hybrid-fibre coaxial network to NBN

Telecommunications is 'renting business model' which is remarkably capital intense with the majority of returns realised by companies that use the infrastructure such as Netflix, Amazon, Facebook, etc

elstra still suffers from its history, ie
"...a former government-owned identity with a history of being burdened by bureaucratic processes, complex legacy systems and archaic work practices..."
Tony Boyd 2018

The importance of the Internet of Things. This refers to the connectivity of all devices through sensors linked to mobile networks, eg
"...Telstra has connecting sensors to 5000 Linfox trucks and it is supplying sensors to monitor the temperature of 40% of the fresh milk exported from Australia to China..."
Tony Boyd 2018

This is potentially the greatest growth area for Telstra

Maybe the future of Telstra is divided into 2 separate companies - infrastructure and retail.

- infrastructure ( include Telstra's network like fixed and mobile infrastructure, Pacnet and data centres). This would be a keen to a public utility like energy, gas, etc

- retail (mobile and fixed customer-facing business plus Network Application Services Division). This would operate like an  industrial business or retailer
"...splitting Telstra into two separate companies along these lines would give investors to options - go with a fixed business and receive low growth but a potential steady dividend, or the retail side with lower earnings but more growth profile and smaller dividends, allowing the company to be more agile and aggressive with how it tackles competition..."
Sarah Thompson 2018

 

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